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Dakshin Bharat clarifies

Dev Bhattacharya

Joint President

Dakshin Bharat Energy Consortium, Mumbai

This refers to the news item `Karnataka reduces demand from Dakshin Bharat' (Business Line, May 4).

The 1,850 MW Ennore power project which would come on- stream in 2005 represents one of the cheapest sources of IPP power to Karnataka, a fact that we understand has also been confirmed by CRISIL, the consultants to KPTCL. Dakhsin Bharat Energy Consortiu m was awarded the Ennore project against stiff international competitive bidding. A feature of the project is the 20-year fixed price LNG contract, the first of its kind in the LNG industry.

The first year tariff to KPTCL at the current exchange rate of RS 47 to the dollar works out to only Rs 2.87 per unit against the Rs 4 per unit mentioned in the news item. The 20-year levellised tariff works out to only Rs 2.97 per unit, considering an e xchange rate of Rs 46.7 to a dollar as of December 2000 and assuming a realistic rupee devaluation rate of 3 per cent per annum thereafter (which implies an exchange rate of Rs 92 to a dollar by 2023, which is considered realistic). Even considering a hi ghly conservative and unlikely rupee devaluation rate of 6 per cent per annum (which implies an improbable exchange rate of Rs 176 to a dollar by 2023), the levellised tariff works out to just Rs 3.75 per unit. We wish to emphasise that though such an ex tremely adverse and improbable devaluation rate would have a disastrous impact on the economy and prices in general, the project levellised tariff remains at an affordable value.

The above tariff numbers are inclusive of all charges including wheeling charges, port duties, all taxes and duties. DBEC has taken great pains to emphasise that the project tariff is totally transparent, has absolutely no hidden costs, and has stood the test of scrutiny by various qualified agencies.

Considering the attractive project tariff, Karnataka had earlier committed to an offtake of 700 MW from Ennore. The Government of Karnataka subsequently undertook a financial restructuring programme of the power sector, based on which the power demand pr ojections were considerably down-scaled to reflect the paying capacity of KPTCL. This resulted in the offtake from Ennore being scaled down from 700 MW to 300 MW.

With Tamil Nadu having already committed an offtake of 750 MW, and Kerala indicating a requirement of 200 MW, a total offtake of 1,250 MW stands committed from Ennore, leaving a balance of 600 MW against the 1,400 MW indicated in the news item. Effo rts are on to tie-up the balance capacity.