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Voice of Electricity Workers The Techno economic clearance (TEC) from CEA has been a controversial issue. The in-principle clearance for DPC’s project pursuant to sections 29 and 44 of the Electricity (Supply) Act, 1948 (the act was issued by MSEB on May 20, 1993. The clearance was subject to clearance from the CEA as required under section 44 of the Act. On November, 26, 1993, CEA granted its conditional clearance…for the project after considering the technical aspects of the scheme at its meeting held on November, 12,1993. A day earlier, on November 11, 1993, the Secretary, Ministry of Power, appears to have written to the CEA and quoted an extract of the minutes of a Foreign Investment Promotion Board meeting of November 5, 1993 which said, “Finance secretary has observed that the question of the cost of power has been looked into and it has been found that it was more or less in line with other projects being put up in Maharashtra”. Accordingly the CEA observed that “The aspects related to import of fuel, foreign exchange rules and deviation from government of India tariff notification indicting return on equity have been examined by FIPB and the project has been found acceptable by them.” On July,14, 1994, CEA issued another clearance for the project ….stating that all the conditions had been complied with. However it reiterated two conditions stipulated earlier viz., Phase II of the project could only be taken up after MSEB/GoM ensures absorption of the entire power including off-peak power in or outside Maharashtra together with the completion of associated transmission system matching with the commissioning schedule of the project. “The CEA as stated in an affidavit by the CEA in the CITU case, considers this to be the “techno-economic clearance” accorded to the scheme, which was based on discussions in a meeting held on 24th June, 1994. The minutes of the meeting is not available to the committee. Furthermore, it is curious that the letter does not mention the word “techno-economic” anywhere, as compared to a clearance given to similar IPP(independent power producer)Projects… Subsequently on December 23, 1994, CEA issued a letter to Ministry of power stating that “the cost of power has been found reasonable by the Ministry of finance, CEA feels that since the cost of power is to be derived from the capital cost, the capital cost of Dabhol project may also be considered reasonable,”. In effect, the CEA said that since the Ministry of finance finds the tariff acceptable, the capital cost is reasonable, which accords greater significance to the role of the tariff… In addition, curiously effect, it makes no reference to the meeting of 24th June, 1994 regarding techno-economic appraisal of DPC mentioned in the CEA’s affidavit. Thus it is moot question whether the CEA discharged the statutory duty cast on it under the Electricity Supply Act adequately. …..Modification to the project after renegotiations: Subsequent to the negotiations conducted by the Negotiating Group.. the CEA received a letter from DPC dated March7, 1996 initiating certain alterations to the Dabhol project and stating that these alterations were minor as per the first proviso of section 32 of the Electricity Supply Act, 1948. The State of Maharashtra, through GoI (Government of India), had sought CEA’s views in the matter. The matter was deliberated upon by the CEA and the GoI was informed that increase in capacity of plant and use of naphtha in place of distillate fuel in Phase I of the scheme were of minor character but the removal of LNG facility from the scope of the scheme and execution of the same by a separate entity in Phase II of the scheme was of a major nature. Subsequently, DPC vide letter dated May 7, 1996 informed CEA that DPC was agreeable to implement the scheme without changes considered as major by CEA, viz. the removal of the LNG facility from the project scheme. As a result DPC and MSEB went ahead with the project, without having off the LNG facilities and avoided obtaining any fresh clearance required from CEA. It is difficult to comprehend how MSEB agreed to accept the re-integration of the LNG facility, which was not in its own interest. The committee finds it inexplicable why there was no mention of any reduction in capital cost of the project from $2,828 million to $2,501 million as agreed to by DPC as mentioned in the Summary Report of the Renegotiating Group, which appears to have been intimated to CEA as part of its economic appraisal. Neither is there any intimation about the change in the cost of power, due to the renegotiation of tariff, which formed the basis for CEA consideration that “the capital cost of Dabhol project(is) reasonable”. The counter-affidavit by CEA on July 1, 1996 in the CITU case however states that “ since no cost increase (was) involved…fresh formal clearance… (was) not necessary”. This only adds strength to the suspicion that the CEA did not consider the economic aspects of the project at all. Indeed, given the non-availability of any official record of the meeting on June 24, 1994 with the Committee, and the nature of this letter dated December 23, 1994, the Committee is doubtful whether the economic aspects of DPC were discussed at all. … Demand for power: As already mentioned, the GoMs submission at the start of the project regarding the need for power was flawed to the extent that it failed to distinguish between different types of load [editor’s note: see yesterday’s excerpts]. This led to an inappropriately high PLF of 90% being taken for purposes of calculating per unit tariff. In 1993, however, based on the past growth of consumption and load, it was possible to argue that a 695 MW plant could be absorbed into the system. This, however, completely omitted any consideration as to whether there was a demand for power at the price that was expected to be charged by DPC… The subsequent error of calculation: ?However, this mistake pales in comparison to the assurance given by MSEB, on September 2, 1998, that there was sufficient demand to absorb the power from Phase II. As mentioned earlier, the CEA clearance to DPC stipulated that “Phase II of the project could only be taken up after ?MSEB/GoM ensures absorption of the entire power including off-peak power in or outside Maharashtra together with the completion of associated transmission system matching with the commissioning schedule of the project”. In response to a letter from DPC on the demand supply position in the MSEB system, MSEB replied, establishing that there was sufficient demand. … The initial error of composition: The MSEB demand projections for justifying the requirement of Dabhol was on the basis of the 15th EPS. The actual consumption in 1998 was higher than the estimate in the 15th EPS by 4.4%. MSEB therefore replaced the base year EPS estimate with the higher actual consumption and applied the EPS growth rates to this higher base. On the face of it, perhaps justifiable, until one looks at the growth of demand in the past. …[T]he actual growth in demand in the MSEB system in the years immediately before 1998 were actually much lower than the 15th EPS estimates. Indeed, there is a sharp slowdown in growth in 1996. This slowdown was completely ignored. While the actual consumption in 1998 was indeed about 4.6% higher than estimated by 15th EPS, the trend growth rate was actually much lower (2% in 1997 and 5% in 1998). As compared to the growth of 2% and 5% in the previous two years, MSEB estimated an immediate return to earlier growth rates of 8 to 9%…
Based on the extremely over
optimistic assumptions, MSEB stated “there is sufficient projected base load
demand for power in the state to justify Phase II of the Dabhol project, even at
a 90% dispatch. This was stated without an analysis of the load curve. Indeed ,
MSEB in its projections before the Committee has submitted that their current
expectations are that consumption in 2004-2005 will be around 67813 MU as
opposed to 91202 MU expected by them in 1998, implying an overestimation of 58%!
On the basis of this unconvincing estimation of demand… Phase II of DPC was
given the go ahead. |
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