Transcript of "Crisis management finolex powerplant"
Crisis Management: Finolex Power
Anmol Rohatgi | Heemanish Midde | Priyanka Dhingra
May – June 2008
Xavier Institute of Management & Research, Mumbai
I hereby declare that this report titled " Crises Management: Finolex Power Plant, Ratnagiri" is a record of
independent work carried out by me as a part of Summer Internship for the MMS course of Mumbai
University for the period starting from May 2, 2008 to June 30, 2008.
The above project was performed for the company R&PM: Edelman, Mumbai under the guidance of Mr.
Roger C B Pereira, CEO & Managing Director
I declare that the information given in the above project is true to my knowledge.
Dr. K. N. Vaidyanathan
Xavier Institute of Management & Research
The work on this project has been an inspiring, often exciting, sometimes challenging, but always an
At the very outset, I wish to thank Mr. Roger Pereira for giving me the opportunity to participate in this
interesting research project, that helped me gain insights into the Power Industry.
I wish to express gratitude to my guide, Mr. Sushil Sharma. He has supported us with his guidance, insights,
encouragement and many a fruitful discussion on the Finolex Power Plant. We are grateful to him to have
spared his time and showing the patience to our answer our queries. The kindness shown by him, in spite
of him being so busy with his work, is highly appreciated.
I would also like to thank Ms. Ophira Samuel, Mr. Rajiv Pereira, Mr. Sachin Talwar, Mr. Arnab Roy, Mr.
Rahul Sawant and all other senior colleagues, who supported me at all times. This ensured the prompt
completion of this project.
This acknowledgment would be incomplete without expressing my sincere appreciation to Ms. Clementine
Henriques and the office staff of R&PM: Edelman for providing the environment, permissions and the
required aids that led to the completion of this Research Project.
- Heemanish Midde
Finolex Industries Limited (FIL) is the largest PVC pipe manufacturer in India. Finolex Cables Ltd has
planned to make inroads into power generation through a Captive Power Plant (CPP) to aid margin
expansion of its PVC plant at Ratnagiri, Maharashtra.
The CPP has been planned to be commissioned in two phases with the first phase of 22MW capacity
slated to get on-stream by March 2008 and the second phase of 21MW by March 2009. This CPP would
lower the company's manufacturing cost per tonne of PVC by approximately Rs600.
The current political aspects are that the various political parties have rifts among themselves; some
political parties are opposing the power plant; some NGOs are against the power plant.
The farmers claim SO2 emissions will reduce the quality and quantity of mangoes and cashew, the major
crops of the region. Further contamination or pollution could be added by the pollutants of thermal power
plant as the waste often includes inorganic or organic compounds. This leads to an unfavorable effect on
the marine life. The size of the fish gets reduced. According to the fishermen, the power plant will hit their
only means of survival. The ash disposal in ash ponds leads to hazardous elements percolating to ground
The wealthy farmers fear to, face loss of cheap labor or hire very expensive labor, once the power plant
comes up. The upper caste farmers fear that once the lower caste farmers get a feel of money (due to the
power plant providing good employment opportunities), the lower caste farmers may question their
authority. The locals are illiterate and passive and hence are easily influenced by others who may have
However, Finolex has some key drivers in its favor. Finolex is going to import coal from Indonesia. This
imported coal has very little content of fly ash. The youth in the region is active; this means that Finolex
can educate the masses about the benefits of the plant by collaborating with the youth. The government
is facing enormous amount of pressure due to the power shortages. The government supports the power
plant because once power is generated it can be sold commercially and this can help in reduction of the
power shortage. A power plant in the region will ensure overall development of the region by providing
employment opportunities to its people and also developing the overall infrastructure of the region.
Our communication objectives are a collaborative means for enhancing individual, organizational,
national, societal well-being rather that primarily for the promotion of the self interest of the most
powerful people inside organization. Our strategy aims at the development of an overarching control
system rather than as a series of uncontrolled, discrete, independent micro activities. We have based our
strategy on the understanding of multi-stakeholder perspectives rather than on the perspectives of merely
the organization and internal stakeholders. Our Strategy is a long-term custodian of the welfare of the
locals rather than only a gratifier of short-term self interests of Finolex. Our strategy is to win trust –
strategy influenced by the economic ethics - to ensure that society does not merely substitute one
extreme managerial approach with another.
We plan to use the following forms of communication as strategies, namely, Educative Strategy,
Negotiative Strategy, and Participative Strategy.
We have a phased roll out. The roll out is a bottom-up movement, i.e. it involves “ecologists” such as
school children and teachers, families and parents, communities, political “champions”, and workers
rather than a “top-down” forceful movement.
The bigger picture to be seen here is that Finolex will gain the trust of the locals and will be able to move
ahead with the power plant. Enthusiastic and supportive locals will also ensure that Finolex has the
required ‘yes’ for further expansion.
TABLE OF CONTENT
I. DECLARATION 2
II. ACKNOWLEDGEMENTS 3
III. SUMMARY 4
1. BACKGROUND 8
1.1. About Ratnagiri
1.2. About Finolex
2. CURRENT SCENARIO 12
3. SITUATION ANALYSYS 14
3.1. Issues Identification
3.2. PEST Analysis for issue identification
3.3. Key Drivers in favor of Finolex
3.4. Circle of Influence
4. PLANNING 23
4.1. Communications Objectives
4.3. Tactics & Roll Out
5. THE BIGGER PICTURE 28
BIBLIOGRAPHY & WEBLIOGRAPHY
A complete socio-economic and cultural profile would only have been possible by visiting the place, which
was not possible due to office work. So, following analysis is based on the newspaper clippings available
from the office and also the internet.
1.1 About Ratnagiri
Ratnagiri district is located in the southwestern part of Maharashtra State on the Arabian Sea coast. The
surrounding area is bordered by the Sahyadri Hills on the East and Arabian Sea on the West. It forms a
part of the greater tract known as Konkan. This region was under the rule of the Mauryas, the Nalas, the
Silaharas, the Chalukyas, the Kadambas, the Portuguese, the Marathas and subsequently the British. In
1948 the independent princely state of Sawantwadi was merged with the Indian union and in 1956 with
Bombay Province. In 1960 with the creation of Maharashtra, Ratnagiri became a district. In 1981 Ratnagiri
district was bifurcated and the new district of Sindhudurg was created.
Ratnagiri has nine tahsils; Mandangad, Dapoli, Khed, Chiplun, Guhagar, Sangameshwar, Ratnagiri, Lanja
and Rajapur. Chief rivers in Ratnagiri are the Shastri, Bor, Muchkundi, Kajali.
Ratnagiri district offers the most diverse attractions for the tourists. The district is endowed with many
tourist assets. The rising hills of Sahyadri on east and the depths of Arabian sea on the west contribute to
the unparallel beauty of Ratnagiri. Ratnagiri is blessed with hills, sea shores, creeks, beautiful rivers, hot
water springs, forests and water falls among many others.
In 1991, the Maharashtra government declared it a “horticulture preferred” area. Government figures
show that over 450,000 people are employed in the horticulture sector. Since 1991, under partial funding
by the state government about 258,000 hectares (ha) of plantations have come up in Ratnagiri, of which
about 51,000 ha was under Alphonso mango. Ratnagiri is noted for the delicious golden Haapus
[Alphonso] mangoes, which are exported to Japan, Singapore and Europe. The heavy rainfall results into
highly eroded landscape in the coastal region. Fertile alluvial valleys produce rice and coconut as the main
crops; fruits and cashew nut cultivation is being promoted.
Top Industries in Ratnagiri:
JSW – Jindal
J. K. Files – Raymonds
Auchtel Products – earlier known as Henkel
Surrounding villages and their Sarpanchs:
Village Name - Sarpanch
Kolembe - Mrs. Gawde
Golap - Mrs. Savita Ghanekar
Pawas - Lyke Fondu
Shiv Sena – Anant Geete (Khasdar)
Rajendra Mahadik – Jilla Pramukh
B. J. P. – Bal Mane
Congress – Sujit Jheeman
Social Activists in Ratnagiri:
Mr. Ganesh Surve – Head, Ranpar Vikas Mandal
Mr. Vitthal Pawaskar – Member
Mr. Prashant Archekar – Member
Mr. Badu Patkar – Member
Mr. Surendra Bhadekar – Member
Local prominent personalities:
Deepak Gadre – Gadre Marine Exports (turnover of 200 crores).
Nazir Naik – Fishing, Ice Factory, Mahindra Vehicle Agency.
Advocate Sanket Ghag – Lawyer and now an important personality in MNS.
Dr. Shrirang Kadrekar – Ex-Chancellor, Konkan Krishi Vidyapith.
Dr. Vivek Bhide – Mango merchant (most staunch opposition).
Matrumandir – Head – Shraddha Deshpande – Plantation issues.
Aushnik Urja Prakalp Virodhi Sangathan – Thermal Power project issues.
Social Service Groups:
Lions Club of Ratnagiri.
Aavishkar – Head – A. L. Jade – Development programs for blind and handicapped children.
Jai Hind Pratishthan – Head – MLA Uday Samant
1.2 About Finolex
Finolex Industries Limited (FIL) was incorporated in 1981 and has been in the "Plastics" business since
then. Beginning as a modest rigid PVC (Poly Vinyl Chloride) pipe manufacturer, FIL went on for backward
integration and now manufactures PVC too.
FIL is the largest PVC pipe manufacturer in India. The Pipes division of FIL is the first Indian IS/ISO 9002
manufacturer. Production capacity of the Pipes division is 40,000 metric tonnes per annum spread over its
two ultra modern plants at Pune and Ratnagiri. FIL offers a wide range of PVC pipes and fittings, for
diverse applications in agriculture, housing, telecom, industry, etc., ranging between 20 mm diameter to
400 mm diameter. FIL also manufactures specialty pipes and fittings, namely SWR (Soil, Waste and Rain
Water) pipes and fittings for construction industry. The Pipes division of FIL has won the PLEXCONCIL "Top
Exporter Award" on five occasions.
FIL has commissioned its PVC plant near Ratnagiri (350 Kms. South of Mumbai) on the West Coast of
Maharashtra State. FIL is one of the largest PVC manufacturers in India. The 130,000 metric tonnes PVC
plant has been set up in technical collaboration with Uhde GmbH of Germany under technology license
from Hoechst AG. FIL manufactures suspension PVC as well as emulsion/paste PVC.
FIL's PVC plant enjoys many location advantages, the important one being proximity to the market.
Further, the Pipes division of FIL and FIL's associated concern consumes captively about 45,000 metric
tonnes of PVC per annum; a distinct advantage available only to FIL
The strength of FIL lies in its quality products and satisfied customers. Over the years, FIL has built a very
large distribution net work which adds to its strength. The name "Finolex" is synonymous with "Quality"
not only in India but also with FIL's international customers.
Finolex is the first to get the prestigious IS/ISO 9002 certification.
Finolex Cables Ltd had planned to make inroads into power generation through a Captive Power Plant
(CPP) to aid Margin expansion of its PVC plant at Ratnagiri, Maharashtra.
The manufacture of PVC is a power intensive process. Finolex is in the process of starting up a 43MW CPP
on the 600 acres of Finolex Industries land. The CPP has been planned to be commissioned in two phases
with the first phase of 22MW capacity slated to get on-stream by March 2008 and the second phase of
21MW by March 2009. Total capital expenditure for the plant is estimated at Rs200cr. This CPP would
lower the company's manufacturing cost per tonne of PVC by approximately Rs600. It would help shore up
the Operating Margins to 15.0% by FY2010 from 12.2% in FY2007. Further, excess power generated at the
CPP is to be sold to the state electricity board, which will generate additional revenues for Finolex.
The group has opted for Finolex Cables to spearhead its power generation foray over Finolex Industries.
Source said, both the companies will work in tandem for the power plant.
While Finolex Cables has been implementing the plant plan, Finolex Industries has made arrangements to
convert its fair-weather port into an all-season port. The company has hired the services of infrastructure
financier IDFC Ltd to do a study on port development.
The plant is based on 100% imported coal sourced from Indonesia, which would be imported all through
the year once the seasonal port at Ratnagiri is converted into a fair weather port.
A company official had told a local newspaper in September 2007 that diversifying into power for
commercial purposes was part of a long-term plan. "We have expertise in building a plant and once the
captive plant is operational, we will have experience of running it too," he had said.
Currently, the company is investing approximately Rs 170 crore in the power plant for Finolex Industries,
in two parts of Rs 100 crore and Rs 70 crore.
The company's captive requirement will be met completely with the first phase, and it plans to sell the
power generated by the second phase of the plant.
In Maharashtra, opposition has been building up to the:
1,200 MW Jindal thermal plant at Jaigad in Ratnagiri
4,000 MW Malvan UMPP at Malvan in Sindhudurg and
10,000 MW nuclear plant, Jaitapur, Ratnagiri
3.1 Issues Identification
3.1.1 What is PEST?
A scan of the external macro-environment in which the firm operates can be expressed in terms of the
The acronym PEST is used to describe a framework for the analysis of the macro environmental factors. A
PEST analysis fits into an overall environmental scan
Political factors include government regulations and legal issues and define both formal and informal rules
under which the firm must operate. Some examples include:
Trade restrictions and tariffs
Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The
following are examples of factors in the macroeconomy:
Social factors include the demographic and cultural aspects of the external macro environment. These
factors affect customer needs and the size of potential markets. Some social factors include:
Population growth rate
Emphasis on safety
Technological factors can lower barriers to entry, reduce minimum efficient production levels, and
influence outsourcing decisions. Some technological factors include:
Rate of technological change
3.1.2 Why PEST?
Regarding the subject of analysis, the PEST tool can be used to analyze business segments, industries,
particular markets or whole economies. Thus the PEST provides a summary of the driving forces in the
macro environment. It identifies drivers that were of high importance in the past, indicates to what extend
they might change in future and how this will interfere with the organization or the whole industry.
Depending on the objective of the analysis, a distinction between the current situation and potential
future changes may be helpful.
3.2 PEST Analysis for issue identification
3.2.1 Political Issues
Political parties have rifts among themselves. The parties have no consensus amongst themselves.
Some members are in the favor of the power plant but other members, from the same party, are
vociferously opposing the project.
To add on to the above said situation, the political parties who are not allies of Finolex are adding to
State Electricity Board (SEB) will lose out on a large industrial customer (Finolex) when the power
plant starts taking care of the power needs of Finolex. This means a loss in revenue. It must be noted
that the SEBs sell power to the industrial clients at a higher rate which maybe to the tune of 200% to
300 % more than the normal rates.
Another point of extreme importance is that this being the election year, every political party aims to
gain some political muscle from this situation. Though the state government is favoring the project
the other parties are lobbying against the ruling party to gain favorable political momentum.
The Ratnagiri Zilla Jagruk Manch filed a public-interest petition in the Bombay High Court, demanding
a proper hearing as they complained of lack of transparency in public hearings related to the power
NGOs: NGOs are not very active in Ratnagiri. Most of the resistance has political backing. Local
people form committees amongst themselves. Following are some examples:
In Munge, Sushil Kumar Shinde announced some news on the Anu-Urja Prakalp (Nuclear power
project). That was enough to agitate the villagers who formed the Anu-Urja Prakalp Virodh Smiti
(Nuclear Power Opposition Committee) instantly.
3.2.2 Economical Issues:
The youth have to go out of town due lack of employment opportunities. Thus there is need for more
Agricultural employment is seasonal.
People in Ratnagiri do not have entrepreneurial aspirations.
The companies that come in give lower quality employment to the locals. Thus they feel left out and
are insecure of their status.
3.2.3 Socio-Cultural Issues
The wealthy farmers fear to, face loss of cheap labor or hire very expensive labor, once the power
plant comes up. As the power plant will give full time employment, many farmers might quit working
for the wealthy farmers and join the plant. The big farmers will lose out on cheap labor as these
farmers decide the wage rate, which is much below the rate specified by the government.
The upper caste farmers fear that once the lower caste farmers get a feel of money (due to the power
plant providing good employment opportunities), the lower caste farmers may question their
The people are illiterate and passive and are very easily influenced by other people who may have
The villagers want development, but are not sure of the intentions of the industries.
They are not sure of how and to what extent industrialization will help them. They do not know what
will be the outcome.
Their decision is dependent on what and how others think of the same issue.
They will welcome the industries once their doubts have been collectively clarified.
Mentality of the people is against industrialization for environmental and political reasons.
3.2.4 Technological Issues
The Thermal Power Station adds to environmental degradation problems through gaseous emissions,
particulate matter, fly ash and bottom ash, deteriorating the ambient air quality. Problem of fly ash and
bottom ash disposal will also increase day by day. The fly ash generated in thermal power station causes
many hazardous diseases like Asthma, Tuberculosis etc. The company has to find ways to dispose the solid
waste without ecologically harming the environment.
Initially, perceptions of objectionable effects of air pollutants were limited to those easily detected like
odour, soiling of surfaces and smoke stacks. Later, it was the concern over long term/chronic effects of
sulphur di-oxide (SO2), Carbon Mono-oxide (CO), Nitrogen oxide (NO2), and suspended particulates that
was brought into light. These pollutants are referred to as volatile organic compounds (VOC). There is
substantial evidence linking them to health effects at high concentrations. Three of them namely O3, SO2
and NO2 are also known as phytotoxicants (toxic to vegetation). The farmers claim SO2 emissions will
reduce the quality and quantity of mangoes and cashew, the major crops of the region.
Water pollution refers to any change in natural waters that may impair further use of the water, caused by
the introduction of organic or inorganic substances or a change in temperature of the water.
In thermal power stations the source of water is river, lake, pond or sea from where water is usually
drawn. Further contamination or pollution could be added by the pollutants of thermal power plant as
waste often includes inorganic or organic compounds. This leads to an unfavorable effect on the marine
life. The size of the fish gets reduced. According to the fishermen, the power plant will hit their only means
The thermal power station is located on the non-forest land and do not involve much Resettlement and
Rehabilitation problems. However, it's effects due to stack emission etc, on flora and fauna, wild life
sanctuaries and human life etc. could be hazardous. One of the serious effects of thermal power stations
is it requires land for ash disposal. This leads to hazardous elements percolating to ground water level
through ash disposal in ash ponds.
Some areas inside the plant will have noisy equipments such as crushers, belt conveyors, fans, pumps,
milling plant, compressors, boiler, turbine etc. Various measures taken to reduce the noise generation and
exposure of workers to high noise levels in the plant area will generally include:
Silencers of fans, compressors, steam safety valves etc.
Using noise absorbent materials
Providing noise barriers for various areas
Noise proof control rooms
Provision of green belt around the plant will further reduce noise levels
3.3 Key Drivers in favor of Finolex
Use of 100% imported Coal (from Indonesia) (percentage of fly ash and floor ash is only 9% as
compared Indian coal which leaves around 40%)
Illiterate population: Most people are not interested in what is happening outside Ratnagiri. People
are economically backward. They do not know what they are missing.
Political support: The political scene is driven by those with vested political interests. They are not
interested in the politics.
Power shortages: the whole of India is facing the acute power shortages
Development of the area
o All season Jetty – could be used for importing/exporting of goods
Self employment Opportunities for locals
o Fall in rate of migration
Industrialization provides more sources income for the locals
Mr. G. S. Arora – Director – Operations, is of the opinion that modern technology doesn’t create problems.
People still talk about old issues like the 40 year old MSEB power plant in Nasik which caused a lot of
pollution. They believe that the new plants will also cause similar problems.
Finolex Industries can donate a share of their profits for the development of the society. Work towards
providing water, employment, schools, roads, etc can be undertaken. This will help them gain goodwill.
Active Youth Illiterate
3.4 Circle of Influence
NGO’s: Work with the farming community and with women’s self-help groups
Government: Will leverage the issue to suit their electoral objectives
Religious leaders And Panchayat: Take their cues from politicians
Moneyed Farmers: Politically affiliated, employ over 4.5 lacs in the mango/ cashew/coconut
sector in the district
Youth: Mechanical and electrical engineers graduating from the collage are absorbed by big
companies like Finolex and J. S. W. The students aspire to go to Mumbai, Pune and even abroad.
Places of Worship
Voluntary Social Service
Official Health Agencies
Voluntary Health Agencies
Health Care Facilities
Circle of Influence
4.1 Communications Objectives
All our communication objectives are based on the challenge to resume work on and complete the 22MW
captive plant within the year.
Communication as a collaborative means for enhancing individual, organizational, national, societal well-
being rather that primarily for the promotion of the self interest of the most powerful people inside
Strategy as the development of an overarching control system rather than as a series of uncontrolled,
discrete, independent micro activities.
Strategy based on understanding of multi-stakeholder perspectives rather than on the perspectives of
merely the organization and internal stakeholders.
Strategy as long-term custodian of the welfare of the locals rather than as a gratifier of short-term self
interests of Finolex.
Our strategy to win trust – strategy influenced by the economic ethics - to ensure that society does not
merely substitute one extreme managerial approach with another.
Ratnagiri is a very politically sensitive city. Therefore, all communications will be delivered with
taking utmost care.
Most resistances are backed by political interests.
People want industries to come in so that they have employment opportunities. But, at the same
time they want these industries to be eco-friendly.
Employment opportunities in the IT sector will be most welcome in this region.
People are economically backward. Many students do not have money for their college fees.
There is regional imbalance. In some parts, people have well paying sources of income. At the
same time there are people who do not get even the basic amenities. Arranging for scholarship
can be a good initiative.
The people should know the outcome of the project. Only after they are confident of the benefits
that they are going to get, will they support the project.
The city experiences power shortage. Every Monday, there is no electricity from morning till
evening. If the power plant is functional, Finolex will be using 43 M. W. of electricity less. This can
prove beneficial to the locals.
There are two separate segments that need to be addressed separately. It is more important to
connect with the uneducated locals. A strategy that does not take them into account will not give
the desired outcome.
There is a tremendous scope for gaining publicity through special issues of newspapers like those
on career. The students have high aspirations. Thus initiatives like contests can work well.
The crisis is non-linear and asymmetric. It is asymmetric since there is variability in the resistance from the
various sections of the society. The variance arises due to various subjective factors. Thereby, our aim is to
cover possibly all these factors.
We label it non-linear because even with a definite input, any outcome cannot be accurately predicted.
This is because any crisis situation will have some sort of probability and chance attached to it. The target
is always valued by the decision-makers. This in this case is general public. So we cannot have a single
strategy to counter the crisis. Our suggestion is to use a multi-dimensional approach to try to cover as
many probabilities we can.
These peculiar properties of this crisis at hand bring out the effects of uncertainty, chance, and friction.
These effects would be driven away from its absolute form by using the following forms of communication
as strategies, namely, Educative Strategy, Negotiative Strategy, and Participative Strategy.
The rationale behind using an educative strategy is to win hearts and minds of the locals. We know that
the majority population is ignorant about advantages of the plant. They are hostile because they are
anticipating a mega power plant (1000MW) instead of the CPP. Changing perceptions is a complex process
that involves a mixture of activities, such as: persuasion, education and free flow of communication etc.
The advantage of this approach is that people will be positively motivated to the change.
Through this strategy, we want to involve the people in the situation. This is likely to increase their
commitment to and enthusiasm for the project. Additionally, there would be an opportunity for
everybody to learn from the experiences of this participation.
It involves a willingness to negotiate with individuals and groups most affected by the change and to
accept that adjustments and concessions that are required to be made. This strategy will acknowledge
that those affected by the change have been given equal rights to have some input in the project, or that
they have some power to resist it if they are not supportive.
4.3 Tactics & Roll Out
As mentioned in the communication objective, we have a phased roll out. The roll out is a bottom-up
movement, i.e. it involves “ecologists” such as school children and teachers, families and parents,
communities, political “champions”, and workers rather than a “top-down” forceful movement.
The tactics and the Roll out has to be drawn keeping in mind the following, the platform being the
uneducated locals and youth.
Key messages: Addressing the environmental issues and the employment opportunities and other
Medium: Museum, Advertorials, Celebrity Endorsements.
Spokesperson: CEO, Hr Director, Celebrity, Doctors and Health officials.
Key messages: Awareness and Education
Medium: Street Plays, Educative seminars, Plant trips.
Spokesperson: Celebrity, CEO, Teachers.
The image of Finolex as a good steward to current and potential customers
The image of Finolex as a formulator of logical and consistent decisions to meet
the crises. Educating people about the pros and cons of the CPP through the
The image of Finolex as a sincere and accurate interpreter of corporate events.
The image of Finolex as a controlling force in organizational events
The image of Finolex as a “good citizen” in business relationships
Timing: Immediately after the inauguration of museum.
Target: Community leaders & Regulatory bodies
Key messages: Full disclosure of company plans.
Medium: One on one discussions, Meetings with company officials.
Spokesperson: Top Officials Of The Company
Timing: Prior to a press release.
Key messages: Full disclosure of company plans with special attention to community concerns.
Medium: Questionnaires to the reporters for their feedback, News conference.
Key messages: Changing perception
Medium: Press conferences.
Target: General Public
Key messages: The advantages of the plant and opportunities it will provide and how it will
Medium: Rally, A Big event
Spokesperson: CEO and the Top officials, KOLs.
THE BIGGER PICTURE
The bigger picture to be seen here is that Finolex
Will be able to go ahead with the plant without hassles
Support in further expansion plans
With the coming of Electricity Act 2003, the power sector, which was highly regulated with lot of licensing
requirements, is in the throes of a long awaited change. The licensing requirements have been reduced, as
the generation company will be free to enter distribution business and vice-a-versa. Currently private
sector accounts for 14% of the total power generation capacity. The remaining is divided between Center
and the state owned companies in the ratio of 40:60.
The generating capacity in India stood at 1,34,717 MW (excluding captive capacities of around 30,000
MW). Out of this, the country utilises a poor 65% due to inefficient transmission and distribution
causing a lot of power shortage. As a result, it has become necessary to resort to power cuts and
other regulatory measures to ration power supply.
Currently central institutions like National Thermal Power Corporation (NTPC) and the State Electricity
Boards (SEBs) dominate the power scene in India. India has adopted a blend of thermal, hydel and
nuclear sources with a view to increasing the availability of electricity. Thermal plants at present
account for 65% (86,936 MW) of the total power generation, hydro-electricity plants contribute 25%
(33,486 MW) and the rest comes from nuclear and wind.
Average transmission and distribution losses (T&D) exceed 25% of total power generation compared
to less than 15% for developing economies. The T&D losses are due to a variety of reasons, viz.,
substantial energy sold at low voltage, sparsely distributed loads over large rural areas, inadequate
investment in distribution system, improper billing, and high pilferage.
Further, the government plans to add around 80,000 MW of generation capacity over the next five
years (XIth five year plan spanning FY07 to FY12) in order to bridge the current demand-supply gap.
This is almost 60% of the current generation capacity in the country. Also, if India has to achieve a
consistent over 8% GDP growth, then power generation has to grow by around 11% to 12% per
The poor performance of India's existing generating units has been a principal cause of power
storages and unreliable quality of power supply. The primary culprits are the coal-fired thermal power
stations, which accounts for over 53% of total installed capacity. The average plant load factor (PLF) of
thermal power stations in India is less than 60%, but varies considerably across regions. However, not
all of the thermal generating stations have such dismal records. For instance, the performance of 500
MW and 200 MW units has been satisfactory, and their PLFs have been higher than the national
average. It is, in fact, the thermal units of 120/140 MW and below that are cause for concern.
The Electricity Act has proposed significant policy decisions that could reform the Indian power sector
over the long term. Licensing norms for entering generation and T&D business of power have been
eased. Under APDRP (Accelerated Power Development & Reform Program), as a one-time measure,
the state electricity boards’ (SEBs) dues to the central utilities are to be converted into state backed
bonds. In exchange, the states have to give an undertaking that SEB losses will not occur and T&D
losses will be checked in a time bound manner.
Recognising that electricity is one of the key drivers for rapid economic growth and poverty
alleviation, the industry has set itself the target of providing access to all households in next seven
years. As per Census 2001, about 44% of the households do not have access to electricity. Hence,
meeting the target of providing universal access is a daunting task requiring significant addition to
generation capacity and expansion of the transmission and distribution network.
Restoration of the financial health of SEBs and improvement in their operating performance continue
to remain a critical issue in the power sector. The Electricity Act of 2003 contains provision for
securitisation of accumulated SEB dues. The government of India has signed MOUs with various states
reflecting the joint commitment of center and states to undertake reforms in a time bound manner.
The guaranteed rate of return has been fixed at 14%. This has been done to encourage investments in
the sector. This is because government does not yet give any incentive returns to companies, which
have efficient performance.
Inefficiencies in state sector utilities have adversely affected capacity addition and systems
improvement. While the SEBs not having enough resources to finance future capacities, they are also
unable to raise funds for investment from alternative sources due to their poor financial and
commercial performance. Also, the inability of SEBs to pay their dues, in full, to central power utilities
(CPSU) adversely affects the finances and investment plans of these CPSUs.
On overall basis, power distribution has been loss-making business in India. But with the privatization
coming in, the investment in transmission and distribution networking is expected to improve.
Distribution business has already been privatized in Delhi and a five years target has been set to bring
down its T&D losses from 52% to 31%. Following Delhi's example, many states like Uttar Pradesh,
Gujarat and Maharashtra are looking at corporatising their distribution circles. However, the slow
pace of reforms in this segment is expected to continue going forward.
Trading in electricity has brought a sea change in the structure of the industry because some parts of
country are power surplus and some are deficient. Power trading company buys power from surplus area
and sells it in deficit area using and transfers power through transmission lines. While the potential for
power trading is huge, the regulator has to play a key role in removing all discrepancies that occur in terms
of electricity pricing across trading regions.
Cables to spearhead Finolex power foray
Wednesday, 14 May, 2008, 09:25
Pune-based cable manufacturer Finolex Cables Ltd plans to make inroads into commercial power
generation through a mega power plant at Ratnagiri, Maharashtra.
The company is planning to set up a 1000 mw thermal power plant on land held by its sister company,
Finolex Industries Ltd.
A source close to the development said: "Though Finolex Group had been contemplating diversifying into
commercial power generation for a long time; it was earlier being planed under Finolex Industries. But
now, the deck has been cleared and it will be Finolex Cables that will take the plans ahead."
The venture is still in the planning stage, but a move into commercial power generation has been decided.
It is currently building a 43 mw power plant at Ratnagiri near its PVC manufacturing plant. The first phase,
under which the company would generate close to 22 mw of power, is expected to be complete by June
this year. The second phase of 21 mw will take another six months. The plant is based on imported coal
sourced from Indonesia.
It is not known why the group opted for Finolex Cables to spearhead its commercial power generation
foray over Finolex Industries. Source said, both the companies will work in tandem for the 1000 mw power
"While Finolex Cables would be implementing the plant plan, Finolex Industries would convert its fair-
weather port into an all-season port," the source said. The company has hired the services of
infrastructure financier IDFC Ltd to do a study on port development.
"Once the port is converted into a fair weather port, raw material for the plant could be imported all
through the year," the source said.
The new plant too will be based on 100% imported coal likely to be sourced from Indonesia and will come
up on the 600 acres of Finolex Industries land.
A company official had told DNA Money in September 2007 that diversifying into power for commercial
purposes was part of a long-term plan. "We have expertise in building a plant and once the captive plant is
operational, we will have experience of running it too," he had said.
Currently, the company is investing approximately Rs 170 crore in the power plant for Finolex Industries,
in two parts of Rs 100 crore and Rs 70 crore.
The company's captive requirement will be met completely with the first phase, and it plans to sell the
power generated by the second phase of the plant.
Down to Earth
Thermal Power projects threaten Ratnagiri's Alphonso mangoes
It could be a bitter end to a sweet, juicy story. Maharashtra is planning mega power plants in Ratnagiri
district, a horticulture zone known for its finest Alphonso mangoes, which are exported to Japan and
Singapore. This year, farmers in the region exported the famous fruit to Europe for the first time. But they
are not sure of the future of the business; they fear emissions from the plants could harm mango
What is at stake is more than the mango plantations.Two thermal power plants of a combined capacity of
about 2,800 mw coming up in Ratnagiri have also raised the hackles of fisherfolk—hot effluents
discharged into the sea could hamper fish breeding. While one plant by jsw Energy Ltd at Nandivade is
under construction, the other in Dhopave by Dhopave Coastal Power Ltd is awaiting the green light from
the Union Ministry of Environment and Forests (moef).
Besides, a nuclear power plant of 6,000 mw is in the pipeline.
This, when the state government has declared Ratnagiri an export zone for mangoes. A representative
from FoodCert, which issues certificates under the European Retail Parties Good Agricultural Practices, has
said that in case of pollution from the thermal power plants, the certificate cannot be granted. This
certification is a must for entry into European markets. The people in the region allege that the jsw Energy
plant violates the environmental clearance process and the Coastal Regulatory Zone (crz) notification,
They do not understand why the government wants power plants in an ecologically sensitive area. The
Ratnagiri-Sindhudurg Regional Plan for 1981-2001 cautions that authorities must develop a suitable
strategy for all the developmental projects in the region since it is ecologically very sensitive. In 1991, the
Maharashtra government declared it a “horticulture preferred” area. Government figures show that over
450,000 people are employed in the horticulture sector. Since 1991, under partial funding by the state
government about 258,000 hectares (ha) of plantations have come up in Ratnagiri, of which about 51,000
ha was under Alphonso mango. The other plantations are of coconut and cashew.
“But once the plants come up, Alphonso mangoes will be the worst affected,” says Vivek Y Bhide, the
president of the Ratnagiri Zilla Jagruk Manch, an organization leading the campaign against the power
projects. His concerns may be valid. Studies have established that sulphur dioxide (SO2), produced on
burning coal, harms the vegetation. According to a study by scientists from the Lucknow-based Industrial
Toxicology Research Centre, published in the Journal of Environmental Contamination and Toxicology in
December 1999, SO2 reduces the quality and quantity of mangoes. Madhav Kelkar of Pawas village, who
started organic farming a year ago, fears his efforts will go waste because of the flyash and SO2 pollution.
Officials at jsw Energy, however, say that the upcoming power plant will use imported low-sulphur coal.
The residents are not convinced. Bhide sites an example from Dahanu in Thane district where the
production of Manilkara zapota, commonly known as chikoo, declined heavily after a thermal power plant
started functioning there in early 1990s. A 2004 study by the Coimbatore-based Salim Ali Centre for
Ornithology and Natural History also found pollution form the plant responsible for the decline in chikoo
Coal and hot
There is another threat. “Flyash and hot, oxygen-poor effluents are going to be released into the sea. This
will spell doom for fisheries, affecting thousands of fishermen,” says P R Arun of the Mumbai-based ngo
Green Alternatives. A report prepared by the Maharashtra Pollution Control Board (mpcb) and the
National Environmental Engineering Research Institute (neeri), Nagpur, on the jsw Energy plant on
directions from the Bombay High Court, pointed out in July 2007 that “hot water discharge locations are
near or on the shore. The near-shore areas are potential fish-breeding zones and hot water discharge may
have adverse impact on breeding areas.”
Fisherfolk experienced exactly this kind of a situation in Jaigad creek in Ratnagiri after the power plant in
Dabhol was started. “For three years we did not have enough fish stock. We could start fishing again after
it was closed,” says Jainuddin, 75, of Jaigad.
The upcoming jsw power plant also proposes a port to unload coal near the creek. Preparing the port will
require dredging; another reason for the fisherfolk to be wary. The proposed port site also harbours
corals, though the rapid environment impact assessment (eia) done by jsw Energy denied their presence.
When Nandivade resident S N Jog sent a specimen to the National Institute of Oceanography, Goa, its
scientist A R Gujar confirmed it was a coral of genus Porites found in calm water of lagoons.
Another problem is of coal storage. The proposed storage site is in the open on a hilltop. Farmers in
Nandivade fear that in case of rain the washed chemicals will affect their crops down hill and contaminate
groundwater. The mpcb - neeri report draws the attention towards the high wind speed at the project
site. It says that such conditions should be considered in planning the handling of coal and flyash, and are
particularly relevant in view of mango and cashew plantation in the surroundings. The report also said that
the rapid eia did not address this vital issue adequately.
The farmers also complain of lack of transparency in public hearings for the project. The first public
hearing was organized by mpcb in August 2006. It was conducted in English while villagers wanted it in
Marathi and at the plant site. “The company did not even provide the eia report before the hearing,” says
Bhide. The second hearing was held in September 2006 at Nandivade. “This time local politicians, who
were with the villagers during the first hearing, supported company officials. Villagers’ objections were not
recorded,” he added. The Ratnagiri Zilla Jagruk Manch also dismissed as bogus the rapid eia for both the
proposed port and power plant. “The eia report is a baseline document for decision-making and the rapid
eia is far from adequate for evaluating a highly polluting industry like coal-fired power plant,” says Arun.
The group filed a public-interest petition in the Bombay High Court, demanding a proper hearing. In May
2007, moef gave clearance to the plant for five years subject to certain conditions. The ministry said no
activities should be taken up in crz, that is, within 500 m from the sea. It recommended a detailed study of
the plant’s impact on the Alphonso mango plantation and fishery. Later, the mpcb-neeri report
recommended redrawing the environment management plan for the port and the plant. mpcb is yet to
respond to the redrawn plan the company submitted. Environmental activists have now filed an appeal
before the National Environment Appellate Authority against the clearance given by moef.
People say Ratnagiri has become an unofficial special economic zone for power plants when the need is
for special ecological zone.
The Indian Express
Govt stalls power project, perks up mango growers
Friday, May 09, 2008
Ratnagiri, May 8: The mango growers of Ratnagiri have reasons to cheer. Their persistent protests against
thermal power plants in the region finally paid off last month. After a year’s battle in the Bombay High
Court and several morchas and dharnas later, the Ministry of Environment and Forests’ decision to stall
the expansion of the JSW Energy plant at Jaigad, Ratnagiri, has come as a relief. The court has also ordered
a study of the impact of power plant on mango and cashew plantation.
“The decision by the MoEF is a small victory for us and will strengthen our stand in the High Court,” said Dr
Vivek Bhide, president of the Ratnagiri Zilla Jagruk Manch, who with the help of other mango cultivators
and villagers filed a PIL in the Bombay High Court.
“We have been saying from the very beginning that Ratnagiri is an ecologically fragile district and
therefore no thermal project using coal should be allowed here. The area is not at all suitable for coal
burning. We are happy that the MoEF has given a thought to our demands. The order is very clear that it
will be premature to give permission for expansion of the existing plan until its impact is studied on the
alphonso mango and cashew cultivation,” he said. The MOEF’s expert appraisal committee on thermal
power and coal mine projects met between April 8-10 to determine the Terms of Reference (TOR) for
undertaking a detailed environment and impact assessment study to grant environmental clearance for
the expansion of 3,200 MW in addition to the existing 1,200 MW.
However, it refused to grant environmental clearance unless a study on the impact of power plant on
Alphonso mangoes and cashew plantation in the district is complete. The committee said Konkan Krishi
Vidyapeeth in Dapoli has been commissioned to study the impact.
“Since the study will take at least four years, it would be premature to take any decision regarding the
further expansion of the just sanctioned power project. The Committee has, therefore, declined to
prescribe TOR,” it said.
“We wish that the MoEF had intervened while the plant was being set up. But the decision is a small relief
as it will be official on what impact the power plants have on mango and cashew plantation. It will prove if
or not we were right in opposing the power plants,” said Amar Desai of Desai Bandu Ambewale of Pawas.
Surendra Dewlekar, a mango grower, said it was a positive sign that the MOEF has finally paid heed to the
problems of mango cultivators.
“We have already seen the affects of power plants on fruits in Dahanu region of Thane. By expanding the
power plants, the ecology of Konkan region will be completely damaged. The fly ash will not only have an
impact on fruits —Alphonso and cashew — but also on the marine life and fishes,” he said.
The 1,200 MW sanctioned project at Jaigarh (Nandivde) has already attracted opposition from locals who
have moved the Bombay High Court against the construction as fly ash from thermal power plants can
affect mango and cashew flowering.
The expansion of the plant has been approved by the state Government and accordingly for
environmental clearance the proposal was discussed by MoEF.
“From the beginning we feel that power projects should be set up in drought struck areas where the land
is not irrigated or barren as there will be no impact of fly ash. We are hopeful that the MoEF will realise
this soon,” Dewlekar added.
Ratnagiri district which has been declared a horticultural zone by the state has 2.75 lakh hectares of land
available under cultivation. Out of this, over 63,000 hectare is under mango cultivation. Apart from the
JSW Energy limited, the state Government has proposed 43 MW captive power project of Finolex
Industries Limited at Pawas (Rantal) and 1,600 MW Dhopave Coastal Power Limited next to Dabhol’s
Ratnagiri Gas and Power Private limited. This has irked both the mango cultivators as well the fishing
community as apart from affecting the pollination of mangoes and cashew, release of the emission of
effluents will also affect the marine life.
However, Joint Managing Director and CEO of JSW Energy S S Rao said the company is confident of getting
approval from MoEF and does not consider the committee views as a setback for the expansion plan.
“The committee’s response is in a preliminary stage. It is only an observation by the committee and it is a
part of process. We will communicate with the MOEF and give presentation. We are positive about the
expansion plans and will pursue its sanction,” he said.
Ratnagiri Gas plans Rs 1,000 cr initial offer for Dabhol plant
New Delhi March 12, 2008
Ratnagiri Gas and Power Pvt Ltd (RGPPL), which operates the 2,140 mw power plant at Dabhol,
Maharashtra, plans to raise over Rs 1,000 crore through an initial share sale.
The company, jointly owned by power utility National Thermal Power Corporation (NTPC), gas utility GAIL
India and the Maharashtra State Electricity Board (MSEB), also plans to trim its debt of almost Rs 7,000
crore by converting Rs 500 crore worth of such loans to equity, after the public offer.
“The plan is to raise the money to pay off our loans,” said RGPPL Chairman R K Goel. The public offer is
likely in October-December this year.
RGPPL is taking the IPO route after lenders declined additional funding to cover the increase costs to
complete the project, a GAIL official said.
The cost to complete the project, which was estimated at Rs 870 crore when NTPC and GAIL took over the
power plant from US-based Enron, more than doubled to Rs 1,960 crore by September 2006 and now
stands at about Rs 2,300 crore, the official said.
The company intends to initiate the public offer process by seeking the approval of the board, at its
meeting on March 20, to change the company from a closely held entity into a public limited body.
Once the company’s board approves the public offer, it will increase its share capital to Rs 4,000 crore
from the current Rs 2,000 crore. Of the Rs Rs 4,000 crore capital, promoters GAIL, NTPC, MSEB and
financial institutions have contributed Rs 2,985 crore. A part of the public offer proceeds will make up the
balance, Goel said.
He said that a part of the Rs 7,000 crore loans from lenders (IDBI, ICICI Bank, SBI, Canara Bank and IFCI) for
the project will be converted into equity through a private placement. The funds mobilised will also be
used to pay off the Rs 350 crore loan taken from Power Finance Corporation (PFC) and another Rs 500
crore loan given by NTPC.
RGPPL meets most of the norms for a public company and would only have to obtain a certificate for
commencement of business from the registrar of companies.
The Dabhol plant will be fully operational by the first week of April when the third power generating unit is
commissioned, Goel said.
Seventy per cent of the work on the liquefied natural gas (LNG) terminal has also been undertaken and it
will be commissioned in November.
The breakwater, which will enable the five million tonnes a year LNG terminal operate to full capacity,
would be ready by the end of 2011.
The cost of the breakwater is around Rs 600 crore and that for the LNG terminal is Rs 4,400 crore.
Goel added that the power plant is expected to function at a plant load factor of around 80 per cent when
it is completed.
Finolex may align with foreign allies for SEZ
Saturday, December 01, 2007
MUMBAI: PVC pipe maker Finolex Industries is in talks with major developers in the US and the Middle
East to jointly develop the 78-acre Special Economic Zone (SEZ) at Chinchwad near Pune.
The company, which for long was toying with the idea of selling the SEZ to a developer, is reportedly in
parleys with some overseas fund managers, too.
Pune-based Finolex Industries was earlier in talks with a US-based company to dispose of the land
completely. “The modalities were decided and the company was sure to sell it off to the US party, but the
company from US took a very long time to come up with a firm commitment and eventually the deal was
called off,” sources said.
Finolex has decided not to sell the land as there has been a tremendous rise in valuations in the past six
months. “There has been a rise in valuations of almost 20% in the past couple of months of the IT SEZ,” he
The cost of the land is currently around Rs 500 crore, he said.
“Developing the SEZ would help the company in unlocking the value of the property,” he said. However,
the names of the overseas developers with whom the company was negotiating are not disclosed.
Meanwhile, Finolex Industries has also decided to go ahead as an independent power producer (IPP) and
is now in talks with the government to seek approvals before the company can bid for a project. DNA
Money had reported on September 11, 2007 that Finolex Industries was planning to get into commercial
“The company has decided to get into power generation business and will start taking up projects once its
captive power plant at Ratnagiri is completely operational,” the source said.
Finolex is setting up a 43 MW power plant at Ratnagiri, Maharashtra, where the group has a PVC pipe
The first phase of the plant will be completed between January and March 2008 and will generate 22 MW
of power. The second phase of an additional 21 MW will take another six months to be operational. The
captive power plant would be based on imported coal.
The Hindu Business Line
Finolex Ind to invest in captive power plant
Pune, June 29, 2006
Board recommends 30 pc dividend for 2005-06
Construction of breakwater at Ratnagiri and investment in captive power plant are the projects that the
Pune-based Finolex Industries has earmarked for the current financial year.
Speaking on the sidelines of the company's annual general meeting, Mr P.P. Chhabria, Chairman, said the
43-MW, coal-based captive power plant at Ratnagiri would be completed by end-2007.
He said the company plans to construct breakwater near the existing jetty at Ratnagiri.
He said the company wants to make the jetty an all-weather port, resulting in savings in inventory cost of
the raw material stock incurred during the monsoon season.
He said the investment for these projects would be about Rs 300 crore.
Mr Chhabria said the company is exploring possibilities of using the vacant land in its pipes facility as a
special economic zone.
He, however, said that about eight acres of land has been given to the Pimpri Chinchwad Municipal
Corporation for road-widening purposes.
He added that the expansion of the PVC resin capacity has been completed during the last fiscal. He said
that the demand for PVC resin in the domestic market was more than the supply by almost three lakh
tonnes per annum.
Mr Chhabria said the company has signed a letter of intent with I.M. Skaugen ASA (IMS), Norway, for
undertaking a study for viability and cost-effectiveness of the LNG supply chain intended to be set up in
Addressing the shareholders, he said the board of directors have recommended a 15 per cent dividend
and an additional silver jubilee dividend at 15 per cent aggregating to a 30 per cent dividend for the
financial year ended March 31, 2006.
The total amount of dividend outgo would be Rs 42.43 crore, he added.
The Hindu Business Line
Finolex to set up captive power plant at PVC unit
Pune, April 29
To ensure continuous and steady supply of power at lesser cost for the PVC plant at Ratnagiri, Finolex
Industries Ltd is setting up a coal-based 43 MW captive power plant. The work has been started and the
power plant would be operational by September 2007.
Mr S.S. Dhanorkar, Assistant Managing Director, Finolex Industries Ltd, noted that it was also thinking of
setting up a special economic zone (SEZ) at its 70-acre prime land vacant at its pipes plant.
The necessary approval for this project was granted by the board of directors at its meeting held on
He noted that approval has recently been received from the Ministry of Environment and Forests for its
proposed project to set up a breakwater facility at Ratnagiri. The construction of breakwater would make
the company's port operational round the year resulting into saving in inventory cost of raw material, he
The impact of the increased capacity on the company's topline is expected to be seen in the current fiscal.
Commenting on the financial performance of the company, he said that it has registered a dip in turnover
and net profit for the year ended March 2006.
Turnover, net down
It has clocked an annual turnover of Rs 907 crore and reported a net profit of Rs 42 crore for the year
ended March 2006, as compared with Rs 1,001 crore and Rs 96 crore, respectively, in the previous year,
according to an official release from the company.
He said the board of directors has recommended dividend of 15 per cent (Rs 1.50 per share) for the year
ended March 31, 2006 and an additional silver jubilee dividend of 15 per cent (Rs 1.50 per share)
aggregating to 30 per cent (Rs 3 per share). The company's EPS stood at Rs 3.41. Profit before tax for the
fourth quarter was higher at Rs 31 crore against Rs 28 crore in the corresponding quarter.
However, the net profit for the quarter was lower at Rs 16 crore as compared with Rs 27 crore during the
same period mainly on account of a higher tax provision.
Ratnagiri power plant to be re-commissioned
Wednesday, April 05, 2006
New Delhi - Ratnagiri Power and Gas, formerly known as Dhabol Power Project, is all set to re-commission
its power plant in Maharashtra by April 25, company officials said Tuesday.
'The first phase of Ratnagiri Power is set to be re-commissioned by April 25 using naphtha as fuel for
generation of 750 MW,' Power Secretary R.V. Shahi told reporters on the sidelines of a conference here.
'The cost of power will be less than Rs.5.70 to Rs.6 per unit that the Maharashtra State Electricity Board
(MSEB) is currently paying for power.'
Shahi said the price of power might be around Rs.4.50 a unit, which though higher than the cost MSEB was
willing to pay is an improvement on its payment to source electricity from other power plants.
Faced with a growing shortfall of power, the Maharashtra government is keenly awaiting the revival of the
Ratnagiri project after four years by using its stocks of naphtha fuel, while state-owned energy companies
strive to clinch supplies of liquefied natural gas for generation of cheaper power.
The Hindu Business Line
Nuclear power plant to come up in Ratnagiri district
Thursday, Sep 29, 2005
MUMBAI: Nuclear Power Corporation of India Ltd will set up its second nuclear power plant in
Maharashtra over the next five years.
Located at Jaitapur, Ratnagiri district of Maharashtra, the plant will generate 6,000-8,000 MW of
The decision to step up the plant was taken on Tuesday at a meeting held by the Chief Secretary,
Maharashtra, Mr R.M. Premkumar, and the Managing Director, Nuclear Power Corp, Mr S.K. Agarwal.
Briefing media-persons here on Wednesday, Mr Premkumar said the project was still in its preliminary
"It will take six months to complete the initial survey and about five years for setting up the project," Mr
The project will set up over 1,000 hectares of land while its residential quarters will require another 250
hectares, he said.
The State Energy Secretary will be the nodal officer for implementing the project.
The Tarapur plant in Thane, set up in 1969, is the only nuclear power plant in the State now, generating
320 MW from two of its units.
Jaigad, Dinghi, Revas Port works to be expedited
Development work of ports to be expedited :CM
Mumbai, May 21, 2007
Maharashtra Chief Minister Vilasrao Deshmukh today assured that the development works of Revas, Dighi
and Jaigad ports in Konkan region would be expedited.
He was speaking after a presentation of the development works of these three ports at Mantralaya here.
Revas port development is being handled by Revas Port Ltd. The port is situated in the middle of the deep
sea and hence state of the art facilities would be made available at this multi purpose port. Apart from
handling cargo, there would be facility for handling liquid gas,coal and car. In the first phase, the port will
have handling capacity of 48 million tonne and by 2040, there will be capacity of handling 130 million
tonne of cargo.
The project costs Rs 5114 crore out of which Rs 1534 crore will be financed by private parties and rest
raised through loan.
Dighi port is being developed by DPL group. The first project is worth Rs 600 crore. The construction is
expected to begin this month itself. Cargo handling will begin from this port by March 2009.
Permissions have been received to construct four lane road to the highway from the port and also linkage
to the railway route.
JSW Infrastructure and Logistics Ltd is handling the development of Jaigad fort. The tenders will be issued
in August 2007 and construction work will begin from September. The first phase construction will be
completed by March 2009. Bharti Shipyard ltd is constructing a modern shipyard at Usgaon near the
Dabhol port in Ratnagiri district. A presentation about the shipyard was also made to the Chief Minister.
Thermal Power Project of 1215 MW proposed at Yavatmal, Maharashtra
April 26, 2007
Darda & Abhijeet Group to set up power project
The Darda Group and the Abhijeet Group of Nagpur have joined hands to set up a 1,215 MW “Jawaharlal
Darda Mega Power Project” in the Yavatmal District of Maharashtra. This project would entail an
investment of approximately Rs. 5,000 crore and generate indirect and direct employment for at least
Earlier, the State Government had issued a Letter of Support to JLD Yavatmal Energy Limited for this
project. The Letter of Support substitutes the MoU, which the Government used to sign earlier. IDFC has
signed a MoU with the Company to pick up equity stake in the project. The coal-based thermal power
project is expected to be operational by 2010.
A formal announcement was made by senior State Government officials at a press conference held in the
presence of Maharashtra Chief Minister Shri Vilasrao Deshmukh, Shri Dilip Walse Patil (Energy Minister),
Shri Vijay Darda (M.P. & Chairman, Lokmat Group & JLD Yavatmal Energy Limited), Shri Deepak Parekh
(Chairman, IDFC), Shri Basant Lall Shaw (Group Chairman, Abhijeet Group), Shri Rajendra Darda (MLA &
former State Minister), Shri D. K. Sankaran (Chief Secretary), Shri Rahul Asthana (Principal Secretary-
Energy), Shri V. K. Jayarath (Principal Secretary-Industries), Shri Rajiv Lall (MD, IDFC), Shri Abhishek
Jayaswal (Director, Abhijeet Group), Shri Devendra Darda (Director of JLD Yavatmal Energy Limited).
Shri Vijay Darda, M.P. & Chairman, Lokmat Group, said, “Yavatmal, apart from offering natural advantages
for the project, also happens to be my freedom fighter father, late Jawaharlal Darda’s hometown. He
dedicated his life for the development of this State. We conceived this project in the background of acute
power shortage in the State and the farmers’ suicide in this district. If he would have been alive, he would
have definitely done something to curb it. This project will be dedicated to his memory. We are planning
to provide free power to the marginal farmers in the district for five years.”
Mr. Abhishek Jayaswal, Director-Abhijeet Group, added, “By partnering with the Lokmat Group and IDFC
in this prestigious project, we have reinforced our commitment to achieve our goal to be in the forefront
of the energy, power and infrastructure sector. This power project has the makings of addressing the
socio-economic objectives of the Maharashtra Government. We are committed to bring the state-of-the-
art technology and adopt the best suited financing options to supply power at competitive rates to the
power starved State of Maharashtra.”
'Assess power plant’s impact on mango belt' Mumbai HC
Mumbai, April 28, 2007
As the first batch of Konkan’s famed Alphonso mangoes takes off for export to the United States amidst
dissolving trade barriers, farmers from the region have got the Bombay High Court to address their fears
on the impact of a proposed power plant in coastal Ratnagiri on their orchards.
Chief Justice Swatantra Kumar and Judge S Dharmadhikari on Thursday have ordered the Maharashtra
Pollution Control Board (MPCB), the region’s leading agricultural university Konkan Krishi Vidyapeeth and
National Environmental Engineering Reasearch Institute, to assess the ecological impact of the 1200
megawatt plant by JSW Energy Ltd, formerly Jindal Thermal Power Company). The judges have asked the
bodies to report the results to the court in two months.
The plant, along with five other proposed power projects along the Konkan, is expected to plug the state’s
shortfall of 5500 MW. In mid-April, HT had first reported on how Konkan struggles to reconcile the need to
address the state’s power shortages with the growing aspirations of its mango farmers and a viable
The plant, which will burn 4.1 million tones of coal each year, is located in the heart of the state’s famed
mango land, spread over 1,025 acres in Ratnagiri's Nandivde and Jaigad villages, 390 km south of Mumbai.
A committee under the central Ministry of Environment and Forests is currently considering its
But in the meantime, farmers and fishing settlements in the surrounding villages worrying about the
impact of the fly ash emission and the potential climate change, galvanised into the Ratnagiri Zilla Jagruk
Manch (Ratnagiri district awarness forum) and moved court.
The forum’s lawyer Advocate V Gangal said, “The judges accepted our argument that no proper
assessment of the plant’s polluting impact had been done. The Environmental Impact Assessment report
and public hearing process was faulty and local gram panchayats had not been provided with copies
contrary to law.” But MPCB Director D Boralkar rejected the contention that his body had not carried out
the process properly.
HT had also reported how the university in collaboration with JSEW would carry out a survey spread over
three years to assess the impact of the plant on the area’s agriculture and fisheries. But Boralkar said that
two months was adequate to carry out the study of this kind. “You leave it to us experts to implement the
court’s order. The basic data of the power plant is already there in the existing EIA report.”
HC Intervene in Jindal's Jaigad TPP
MPCB report sought in HC on Jindal`s power project in Ratnagiri
Mumbai, April 29, 2007
The Bombay High Court has asked the Maharashtra Pollution Control Board to file an environmental
impact assessment report with regard to the Jindal Group's proposed coal-based thermal power plant in
While preparing the report, to be filed in two months, MPCB is to rope in the national environment
engineering research institute (Neeri), the division bench of Chief Justice Swatanter Kumar and Justice S C
Dharmadhikari directed last week.
The court's order came on a PIL filed by members of Ratnagiri Zilla Jagaruk Manch who are opposing the
project fearing environmental pollution, as the proposed plant, aimed at generating 1200 mw of power,
would use coal as fuel.
It would give rise to a lot of flying ash which could destroy the horticulture in the area, the petitioners
The plant, to be set up by JSW infrastructure and logistics, is coming up in 878 acres of land at Nandiwade
village near Jaigad. The area has an extensive cultivation of mango, cashew and other fruits, which would
be hit because of ash thrown into air by the project, the PIL said.
The petitioners argued that a similar project at Dahanu in Thane district spelled disaster for the Chikoo
orchards, which experienced a sudden dip in productivity.
Their lawyer V A Gangal had earlier alleged in the court that the district administration and local politicians
were hands-in-glove with the company, ignoring the local people's apprehensions.
Power plants spoil coastal paradise
Nashik, Maharashtra: One thermal power plant choking Nashik with fly ash has not taught the
Government any lesson, so it is planning three plants along Maharashtra’s ecologically fragile Konkan
The clouds of fly ash residue from the coal-based Nasik thermal power plant are killing the famous
vineyards of Nasik. “Nashik is famous for its wine grapes but these days because of the ash our gardens
are getting affected,” says farmer Anantrao Jagtap of Saamangaon village.
"This thermal power plant is releasing its liquid fly ash into a dam. The fly ash percolates down to the basin
of River Daarna," says Jagtap.
Saamangaon residents claim drinking water has been contaminated in their village and six other villages.
“We are facing diseases and our cattle are ill,” says a Saamangaon resident.
The villages have more bad news coming. The Maharashtra Government plans three 4,000-MW thermal
power plants, which may harm the Konkan coast.
The first plant will come up at Jaigadh, which is home to a historical fort and is a habitat for dolphins.
The second will be at Vijaydurg, famous for its mango orchards and the third at Shahpur, near the
weekend resort of Alibaug.
Farmers in the three villages are worried, because they know what has happened to the farms around
Nashik. " Jaigadh is world famous for the Devgadh Alphanso mango. The power plant can be built
anywhere but the mangoes grow only here," say a farmer.
But Union Power Minister Sushil Kumar Shinde says villagers need not worry. "When Enron (power plant)
was coming up then it was said that the mangoes would be affected but it didn’t. We will convince people
about the new power plants," he says.
But the Minister forgets that the Enron plant runs on Naphtha which is less polluting than coal.
Power to destroy
Fri, Feb 15 02:56 AM
In Ratnagiri district of Maharashtra, nature has been kind: a virgin coastline, cushy climate and a lush land
spouting the sweetest of mangoes. Till recently, farmers in the heartland of Alphonso mangoes had little
to complain as the fruit was lapped up in loads by domestic and foreign consumers. Now, things have
begun to sour. In a bid to combat the rising power shortage, the state is gearing to set up three thermal
power plants in the district. The result? The air is thick with talk of the imminent pollution and its
disastrous effect on mangoes.
"The pollination of mango takes place once a year. If sulphur and nitrogen compounds get saturated, the
dew will turn acidic and affect the pollination," says 49-year-old Anant Gopal Biwalkar, a mango cultivator
from Nandivde in Ratnagiri, Konkan.
Simply put, the chemicals (suphur dioxide and fly ash) likely to be emitted from the coal-fired power
plants could drastically cut down on the quality and quantity of mangoes. Little wonder then that Amar
Desai is wracked by similar concerns-only bigger in magnitude. Says the mango exporter from Pawas who
has sold the fruit to Germany and the Gulf and is ready to send it to Japan and USA this year: "This might
be the last time I export the fruit. The buyers from Japan who visited a few weeks ago have warned that if
the fruit has any trace of pollution, the consignment will be cancelled," he says.
It's a fear that has been stalking the mango belt even as the state-faced with 7,000 MW of power shortage
in the coming summer-readies to set up the three power plants in a 110 km radius: the 1,200 MW JSW
Energy Limited at Jaigarh (Nandivde), the 43 MW captive power project of Finolex Industries Limited at
Pawas (Rantal) and the proposed 1,600 MW Dhopave Coastal Power Limited next to Dabhol's Ratnagiri
Gas and Power Private limited. Besides, the country's first site for the 6,000 MW nuclear project is also
being proposed at Jaitapur.
While the strident opposition from farmers has resulted in a stay on the construction of the Finolex plant,
it hasn't stopped the JSW project despite a case in the Bombay High Court, and the land acquisition at
Dhopave is likely to begin soon.
"Ratnagiri has been declared a horticultural zone by the state, resulting in large-scale production of
mango, cashew and coconut. Importantly, the state government is also promoting Konkan as the next
tourist destination. Is it then right to have three thermal power projects in Ratnagiri alone?" asks Dr Vivek
Bhide, president of the Ratnagiri Zilla Jagruk Manch, who filed the PIL in the high court stating that the
Environmental Impact Assessment report submitted by the JSW Energy Ltd was faulty.
According to the Ratangiri district administration-the district was declared a horticulture zone in 1991
owing to the humid climate fit for fruit plantation-of the 2.75 lakh hectare land available for cultivation,
over 63,000 hectares is under mango cultivation. Unfortunately, Guhaghar (4,954 ha), Ratnagiri (15,233
ha) and Rajapur (7,966 ha)-where the thermal power projects are planned-account for one-third of the
total area under mangoes. The district did a business of an estimated Rs 2,200 crore through the trade of
"No one is opposing the power projects and denying the fact that state requires electricity to cover the
deficit. But why plan all the projects in Ratnagiri?" asks Jayant Bhargav Biwalkar, whose 35 Alphonso
plants are outside the compound wall of JSW project.
Rahul Asthana, Principal Secretary of the state Energy Department, says that the plants' location was
decided because it's a coastal area which would make it easy to ferry coal. He added, "It's not as if the
state is not concerned about Alphonso mangoes and the trade prospects. We will follow all the
procedures and clearances from the Ministry of Environment will be received. If the plants affect the fruit
and cultivation, then perhaps the project will be stopped. Only after following due procedures and getting
clearances from the Ministry of Environment will the project be given a go ahead."
The farmers' fears are justified, considering that the thermal power project at Dahanu destroyed the
chikoo plantation. "The fly-ash-JSW plant will burn 4.1 million tonnes of coal each year-will result in acidic
dew or settle on mango flowers, both of which will destroy the harvest," says Nilesh Tirekar, who worked
at a fly-ash company in Dahanu.
Importantly, it's not just mangoes which will be affected. Given the location of power plants, the fishing
community is also fearing the loss of business.
Says Madan Jadhav, chairman of Laxmisagar Sahakari Sanstha of Dhopave's fishing community: "The
pollution of the creek from the neighbouring RGPGL plant has reduced the size of the fish. Our business
has suffered and now these projects we will wipe us out completely."
According to local Congress activist Suamti Jadhav, people in five villages likely to be affected due to the
Dhopave plant are divided over the issue. "The fishing community wants a job for each family member as
well as compensation. If it's not provided, the plant will not be allowed to be set up at Dhopave," she said.
Given the stridency of protest, the state Government has appointed Dr Balasaheb Sawant Konkan Krishi
Vidyapeeth to conduct a three-year study to assess the environmental impact of the power plant on
mango and fishing. Dr Shekhar Kowale, handling the fishing survey, says it will take five years.
"The power projects will be set up by then and Alphonso cultivation will have stopped. We might then
have to migrate or commit suicide like the farmers in Vidarbha," says Anant Biwalkar.
Plan to set up thermal power plant in Konkan generates heat
Farmers and fisherfolk are convinced it will pollute the air and affect horticulture in the region
Low sulphur coal will be used we will adhere to all environment norms: company
Main crop to be hit will be Alphonso mangoes, fear farmers
JAIGAD (Ratnagiri district): Angry mango farmers and fisherfolk in Ratnagiri district are questioning the
decision to locate a 1200 MW coal-based power plant at the stunning Jaigad creek on the Konkan coast.
They are convinced it will pollute the air and adversely affect the extensive horticulture in the region. They
say that their land was acquired for a steel plant but is now going to be used for a thermal power plant.
Many gram panchayats in the region have passed unanimous resolutions opposing the project.
JSW Energy limited, part of the O.P. Jindal group, the company setting up the plant, says that its annual
coal requirement of 4.14 million tonnes will consist of imported low sulphur coal and that it will adhere to
all environment norms. But the farmers are not convinced. The fisherfolk who depend on Jaigad creek for
their livelihood are also worried that the proposed port and the power plant will end their business.
The Ratnagiri Zilla Jagruk Manch, which was formed soon after the two public hearings held about the
plant, is questioning the absence of transparency in the process of establishing the plant. The Manch also
describes as bogus the Rapid Environment Impact Assessment (EIA) carried out by the company for both
the proposed port to unload the coal and the power plant. It has filed a public interest litigation petition in
the Bombay High Court, demanding a proper hearing of their grievances. The court has served notices on
the Collector, the company, the Ministry of Environment and Forests (MOEF) and others.
The project awaits clearance from the MOEF. About 784 acres is already with the company and it is buying
up 200 acres more. JSW is one of the eight companies that signed MOUs with the Maharashtra
Government in 2005 to set up power plants. The State is facing a massive power shortage and load
shedding this year touched 5700 MW. Yet, although farmers acknowledge the need for power, they feel
that locating such a plant in a fragile ecosystem would destroy it completely.
Dr. Vivek Bhide, president of the Manch and a successful mango grower from Malgund, is proud that this
year, along with 13 other farmers, he has exported Alphonso mangoes to Europe for the first time. He
heads the Shree Mango Shetkari Mandal and, like many farmers, is apprehensive that once the power
plant comes up, Alphonso mangoes will be the worst affected.
Farmers are particularly upset about the way the first public hearing, organised by the Maharashtra
Pollution Control Board, was held in August 2006. ``The company did not even provide the EIA report
before the hearing. There was chaos at the first hearing as the company could not give information in
Marathi and it was postponed to next month,'' says Dr. Bhide. A month later, the next hearing was held at
Nandivde where the plant will be located. ``This time there was a dramatic change and all the politicians
were on one side with the company officials and the Collector. Our objections were not recorded and
neither were our concerns addressed,'' he added.
According to government records submitted to the court, Ratnagiri has 61,000 hectares under mango,
4,930 under coconut and 83,262 of cashew. Over 4.5 lakh people are employed in this sector in the
district. The farmers export to countries that have stringent norms and have obtained certification after
Digambar Kamlakar Kane, a mango exporter from Reel near the proposed plant, points out that the
company acquired land in 1993 for a steel plant.
In Kunbiwadi in Nandivde, which is about 200 metres from the proposed coal-stocking yard, there is much
anger. A half finished white cement fence marks the boundary.
Last December, Madhukar Damle went on a hunger strike to oppose the plant. ``The situation is suicidal
and the common farmer will be affected,'' he said. His brother Vasant Damle, who sold the land to the
company, has demanded that it be returned since the company was not setting up the plant they acquired
it for. Land was acquired in the name of Jindal Iron and Steel, says the 70--year-old Damle who managed
to get hold of the original agreement of sale. ``We have been deceived by the company,'' he says. Also, at
that time, the company registered an agreement with the villagers saying that in case a steel factory did
not come up in five years, the people had the option of buying back their land at Rs. 17,000 per acre. ``I
want my land back now," says Damle, a former schoolteacher and journalist.
Raaj Kumar, joint managing director and CEO, JSW Energy Limited said land was partly acquired for an
integrated steel plant in 1993 but there were objections then and the industry was shifted to Karnataka.
The plant and port is expected to cost around Rs. 4,800 crores. He said the company was prepared to
adhere to all pollution control norms and even help in local development.
Gains in the ‘Pipe’line
Finolex Industries (Finolex) is the largest manufacturer of PolyVinyl Carbonate (PVC) pipes and the second
largest PVC resin manufacturer in India. We expect the usage of PVC pipes to increase going ahead on the
back of theheightened construction activity and increase in land irrigation in the country on account of the
various government initiatives, which are targeted at improving land productivity. The construction-
related investments in the country are expected to gather pace hereon wherein it is poised to increase
from Rs2,150bn in the last two years (2005 to 2007) to over Rs3,000bn over the ensuing two years. Finolex
is also in the process of setting up a captive power plant (CPP) to reduce its operating costs.
CPP to aid Margin expansion: The manufacture of PVC is a power intensive process. Finolex is in the
process of setting up a 43MW CPP in Ratnagiri, Maharashtra. The CPP would be commissioned in two
phases with the first phase of 22MW capacity getting on-stream by March 2008 and the second phase of
21MW getting commissioned by March 2009. Total capital expenditure for the plant is estimated at
Rs200cr. This CPP would lower the company's manufacturing cost per tonne of PVC by approximately
Rs600. It would help shore up the Operating Margins to 15.0% by FY2010 from 12.2% in FY2007. Further,
excess power generated at the CPP would be sold to the state electricity board which will generate
additional revenues for Finolex.
Capacity expansion to support Topline: Finolex currently has a capacity to manufacture 2,60,000 metric
tonnes (MT) of PVC and 69,600MT of PVC pipes p.a. It is in the process of expanding its production
capacity of PVC pipes to 1,00,000 p.a., which is expected to be commissioned by March 2008. Global
demand for PVC-based products continues to be robust and domestic demand is in excess of the
production capacity. The demand for PVC pipes and fittings has also registered substantial growth backed
by a good monsoon and booming construction industry. Various initiatives by the government to increase
the reach of irrigation and drinking water supplies are providing further boost to the demand for PVC
pipes and fittings.
Windfall from sale of land at Pune: Finolex has about 80 acres of land at Pune, which has the potential for
residential and commercial development. We estimate that Finolex would be able to realise Rs550-600cr
from the sale of this land. These proceeds could be used to support the a company's capacity expansion
plans. We have factored in the sale of land in our estimates at a conservative value of Rs500cr. Our Target
Price includes Rs40/share from the sale of land.
Port could unlock value in the future: We believe that Finolex is also looking at Port development as a
future business opportunity. Finolex currently has a captive jetty, which would be extended to outside
players. Potential revenues could be up to Rs400cr per year. We have currently not factored in the
business from the port in our estimates.
Outlook and Valuation
Finolex has excellent market potential in the PVC pipes space, which it is capitalising on by expanding its
production capacity at an appropriate time. Finolex is also venturing into Power generation (with a CPP)
along with the Port business, which would enhance its OPM’s substantially. The 14.5% holding in Finolex
Cables is another embedded value in the company. This translates into approximately Rs250cr of
investments, which translates into approximately Rs20 per share for Finolex Industries. We expect
Finolex's Net Profit to grow at a CAGR of 26% on the back of a 20% CAGR growth in Net Sales over FY2007-
10E coupled with Operating Profit Margins expansion from 12.2% in FY2007 to 15.0% in FY2010. We
Initiate Coverage on the stock, with a Target Price of Rs158.
6.3 Captive Power Plant
Captive Power refers to generation from a unit set up by industry for its exclusive consumption. The
estimates on captive power capacity in the country vary with the Central Electricity Authority putting the
figure at about 11600 MW while industry experts feel that it is much higher, close to 20000 MW Industrial
sector is one of the largest consumers of electrical energy in India. However, a number of industries are
now increasingly relying on their own generation (captive and cogeneration) rather than on grid supply,
primarily for the following reasons:
Non-availability of adequate grid supply
Poor quality and reliability of grid supply
High tariff as a result of heavy cross subsidization
The State Governments and SEBs have been concerned about the growing importance of Captive Power
Plants on account of the following reasons:
Captive plants may have adverse impacts on the finances of the utility, such as:
Industrial load is the main source for cross-subsidising revenue flows
Billing and collection is much more efficient for HT consumers
SEBs ability to service escrow accounts for security packages is also reduced
Non-optimal growth of the sector.
Problems in grid management especially in case of states with surplus power
Adverse environmental impacts arising from types of fuels used and from higher emissions per
unit of production, as compared to large power plants
Reliability of power supply from captive and cogen plants as a source of firm power While on the
other hand the concern of the owners of captive and cogen plants stems from:
Non-remunerative tariff structure for surplus power produced by them
No risk sharing in case of non availability of fuel, change in variable cost due to switching of fuel
after entering into power purchase agreement (PPA), etc
Inadequacies in wheeling and banking facilities
High contract demand charges.
High level of duties and taxes on sale of power
High wheeling losses assumed for power to be sold to grid by captive or cogen plant
Need to devote time and energy to an activity, which is not their core business
Restrictions on the minimum amount of power to be wheeled
If the captive power plant (CPP) fails, charges for back-up or standby power from the grid are
twice the normal rate for captive plants
No formal policy for purchase of co generated power (in most of the states)
The feature of the policy of Maharashtra with respect to promotion of captive power plants and
cogeneration is as follows:
The permission for installation and running the captive power plant will be granted by the
government and the capacity of the CPP will be limited to cover the existing demand (MW) plus
1/3 of existing demand in MW or demand in MW for future expansion
Third party sale is allowed and in this case a tripartite agreement will have to be signed between
the Board, CPP owner and the third party receiving power from CPP
CPP can sell surplus power to maximum two industrial units and is also restricted up to 25
percent of the generated units (kWh)
Captive generating company or any other company intending to sell surplus electricity to third
parties would require a prior permission from the Energy Department of the State Government
under section 28 of the Indian Electricity Act 1910
The wheeling charges and transmission losses are determined in terms of distance transmitted.
The wheeling charges and transmission losses are determined as 2% and 5% respectively for a
distance of 050 km; 4% and 8% respectively for a distance of 50200 km; and 6% and 10%
respectively for a distance above 200 km
Rate at which surplus power would be purchased would be decided by MSEB and it will not
purchase any power during night hours, that is 2200 hrs to 0600 hrs
In case of planned shut down of the CPP, the excess demand recorded over and above the
revised contract demand will be charged at double the normal demand charge rate of the
respective tariff in force from time to time
Indian Power Sector
The Indian power sector, long considered a symbol of the nation’s state led economic development, has
been plagued by bureaucratic inefficiency and political interference for decades. Vertically integrated
state utilities (State Electricity Boards (SEB)) are practically insolvent with commercial losses estimated at
INR 225 bn (US$ 5 bn) for FY 2004 alone2. The tariff structure is differentiated by consumer category with
a cross subsidy charge that penalises commercial and industrial users at the expense of the more
politically influential agricultural sector. Transmission and distribution losses remain high – almost 40% –
and power theft is endemic and tolerated.
The Electricity Act 2003 struck at the core of these issues. Replacing the disparate reforms of the 1990s,
the Electricity Act 2003 brought together structural and regulatory reforms designed to foster competitive
markets, encourage private participation and transform the state’s role from service provider to regulator.
The Act directs the unbundling of vertically integrated utilities and creates autonomous state electricity
regulatory commissions. Electricity trading has been recognised as a separate line of business and
regulatory commissions have been directed to develop rules on open access, rationalise tariffs to
progressively reflect cost of supply, reduce cross subsidies, institute strong anti-theft provisions and
protect consumer interest.
In India’s constitution, electricity is a shared responsibility between the centre and states. Though overall
progress at the state level is mixed, almost all the states have initiated some structural and regulatory
reforms. About 22 of the 29 states have established electricity regulatory commissions empowered to
regulate tariffs and establish performance codes. About half the states have unbundled the vertically
integrated state electricity boards. Some form of unbundling across all the states is expected by the target
date of June 2005. Despite the variation on progress, it is clear that the basic thrust of the Electricity Act
has percolated down to the states. A critical mass of reform initiatives has developed and implementation
hurdles now relate mainly to difficulties of the restructuring process.
While the centre-led Electricity Act laid out the vision for a deregulated power sector, states have the
charge of implementing the restructuring process. There is as yet no clear road map for the restructuring
process and the Electricity Act leaves it to the states to decide. Delhi and Orissa, the states at the most
advanced stages of restructuring, pursued two different models and provide the only real life experiences.
The road to competitive power markets in India, particularly one with active private participation, will
depend on how the restructuring process deals with three key issues:
1) Payment risk from sale of electricity
2) Tariff rationalisation
3) Open access
One of the biggest worries for private generators is that they may never get paid for the electricity they
produce. Most distribution companies are still under state control, either directly through the SEB or their
unbundled successors, and are financially distressed. Commercial losses at SEB in 2004-05 alone are
estimated to be INR 225 bn (US$ 5 bn). Average sales revenue to cost ratio remains well under 70%. Much
of these losses result from the underlying tariff structure and low revenue collection rates. The tariff
structure is defined by consumer class and a cross subsidy structure is used to subsidise domestic and
agricultural users. The higher rates paid by industrial consumers are insufficient to cover the subsidies
provided. In addition, revenue arrears, or collection inefficiencies, on average are about 25 – 30%. In some
states like Bihar and Jammu and Kashmir, revenue arrears are astoundingly high – as much as 155% and
227% respectively. In a recent rating of SEBs conducted by the Ministry of Power, the median score for
financing risk was well short of 10 against a maximum of 23. Only ten states achieved a score greater than
10. While investors may be lured into power projects with promises of long-term agreements, the ability
of SEBs to pay for the purchase of electricity still remains questionable. Simple unbundling followed by
privatisation or corporatisation may notbe sufficient. The restructuring process must determine who
absorbs the existing liabilities and re-establish the financial credibility of electricity purchasing entities.
Subsidies to agricultural and household consumers coupled with very high levels of T&D losses have long
kept tariffs out of sync with costs. Seeking to bring revenues in line with the cost of supply, the Electricity
Act required the independent regulatory commissions to rationalize tariffs. Most states have followed the
guideline with vigour. Through the tariff orders, a number of commissions have instituted measures to
allocate revenue requirement in an economically efficient manner by reducing the extent of cross
subsidies. Though these new tariff orders are steps in the right direction, bringing them in line with supply
costs will ultimately involve raising prices for the vast majority of consumers, particularly in the
agricultural sector, that have been used to decades of subsidised power. The planning commission
estimated that for SEBs to post a rate of return of 3% in FY 2001, average tariffs would have to be
increased by approximately 50% (or INR 1.17 /kWh)6 that year. Such increases challenge the fundamental
nexus between politicians and consumers. Tariff rationalisation will be more than an exercise in bringing
revenues at par with cost and will require significant political capital to be spent in convincing agricultural
users to accept higher prices. Thus far, the politicians have yet to wager their bets.