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C. Shivkumar

The customs duty reductions alone are expected to push down the first year tariff from the project to about Rs 2.40 a unit.

BANGALORE, March 6

WITH the Finance Minister liberalising the mega power project policy, the Nagarjuna group promoted 1,015-MW project is expected to benefit by at least Rs 500 crore in customs duty concessions.

Sources said the Nagarjuna Power Company Ltd (NPCL) would also qualify to become an inter-State project as a result of this liberalisation in guidelines. The guidelines imply that all projects above 1,000 MW capacity become inter-State projects.

The sources said that NPCL was eligible to supply to the neighbouring States, especially Kerala State Electricity Board (KSEB) on the same power purchase conditions as applicable to the Karnataka Power Transmission Corporation Ltd (KPTCL).

They said policy liberalisation would translate into a hefty reduction in the estimated power tariff. The customs duty reductions alone are expected to push down the first year tariff from the project to about Rs 2.40 a unit. In addition, the fall in interest costs would also translate into a further reduction in tariffs. NPCL's debt equity ratio has been fixed at 70:30 on the basis of a CEA-approved project cost of $1.15 billion (about Rs 5,500 crore). The project debt requirement is estimated to be in the region of Rs 3,900 crore.

Meanwhile, the sources added that the payment security mechanism is on the verge of being finalised after the intervention of the Union Ministry of Power.

A meeting between the lenders — comprising the Power Finance Corporation, Rural Electrification Corporation, ICICI and the IDBI — and the State government is slated for next week. It is said that the reform-backed package, prepared by Crisil Advisory Services has already been cleared by the bulk power buyer in the State — KPTCL. But this package would now have to be backed by a State Government guarantee as demanded by the project lenders. The project financiers providing deferred payment guarantees to the foreign export credit agencies have insisted on the State Government guarantee as a precondition to financial closure.

The State Government has indicated its willingness to provide backing for the project in view of the severe power deficit estimated at about 2,000 MW with the fallout on the state industrial and agricultural output.

Once this approval is completed, the sources said, the package would come into effect before the project commission date.

Sources also said the issue of cross border sales to KSEB would be left to the discretion of the State Government and the KPTCL. This was because under the original PPA condition the entire capacity was earmarked for Karnataka. Therefore, KPTCL would be nodal agency for entering into an agreement with KSEB.

Once the NPCL project is fully commissioned by end of by 2007, the addition to the State grid would be at least about 7,600 million units per annum assuming a plant load factor of 85 per cent.

Kerala, the sources indicated, was also interested in lifting power from the project to take advantage of the low tariffs. Besides, unlike liquid fuel-based projects, which include Kayamkulam and BSES Kochi, Kerala is entirely dependent on hydel sources for meeting its power supply requirements. Tariff from the liquid fuel generators are currently about Rs 5 per unit in view of the steep escalation in naphtha prices worldwide. Consequently NPCL's current tariff has appealed to the KSEB, the sources said.

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