Date:09/07/2007 URL: http://www.thehindu.com/2007/07/09/stories/2007070958010100.htm

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Karimnagar project to be based on thermal power

M. Malleswara Rao

Fallout of uncertainty over gas price; fears of heavy burden on consumers

HYDERABAD: The Andhra Pradesh Government has taken a decision not to take up the contemplated combined-cycle 2,100-MW capacity Karimnagar power project to be based on gas and instead convert it into a thermal station.

This is seen as the first casualty of the uncertainty prevailing on gas price over which Chief Minister Y. S. Rajasekhara Reddy is battling with the Centre and Reliance Industries Ltd. (RIL).

Even if a marginal reduction is possibly made, conceding Dr. Reddy’s plea, the RIL price may revolve around $ 4 per MMBTU (million metric British thermal units). With transport charges, this works out to Rs. 8 per standard cubic metre (SCM), a quantum jump from the present cost of Rs. 3.20 per SCM (with transport charges) which was based on the Administered Pricing Mechanism (APM) price fixed at $ 1.95 per MMBTU before the introduction of New Exploration Licensing Policy.

Prohibitive cost

The fuel cost, therefore, will be prohibitive for the project. If RIL goes ahead with its “market-discovered” price ignoring the State’s request, a heavy burden of over Rs. 2,500 crore will be placed on the power consumers in the State annually. This will be so because several power stations with a capacity of 2,700 MW will need to buy gas from RIL.

Some experts are of the view that a high gas price will prevent other industries like cement from opting for gas as fuel.