annexure 3.2

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Infrastructure Development Action Plan for Chhattisgarh Final Report

Annexure III.2 1

Captive Power refers to generation from

a unit set up by industry for its exclusiveconsumption. The estimates on captivepower capacity in the country vary withthe Central Electricity Authority puttingthe figure at about 11600 MW whileindustry experts feel that it is muchhigher, close to 20000 MW

Industrial sector is one of the largestconsumers of electrical energy in India.However, a number of industries arenow increasingly relying on their owngeneration (captive and cogeneration)

rather than on grid supply, primarily forthe following reasons:

Non-availability of adequate gridsupply

Poor quality and reliability of gridsupply

High tariff as a result of heavy cross-subsidisation

The State Governments and SEBs havebeen concerned about the growingimportance 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 sourcefor cross-subsidising revenueflows

Billing and collection is muchmore efficient for HT consumers

SEBs ability to service escrowaccounts for security packagesis also reduced

Non-optimal growth of the sector.

Problems in grid managementespecially in case of states withsurplus power

Adverse environmental impactsarising from types of fuels used andfrom higher emissions per unit of

production, as compared to largepower plants

Reliability of power supply fromcaptive and cogen plants as asource of firm power

While on the other hand the concern ofthe owners of captive and cogen plantsstems from: Non-remunerative tariff structure for

surplus power produced by them No risk sharing in case of non-

availability of fuel, change in variablecost due to switching of fuel afterentering into power purchaseagreement (PPA), etc

Inadequacies in wheeling andbanking 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 orcogen plant

Need to devote time and energy to

an activity, which is not their corebusiness Restrictions on the minimum amount

of power to be wheeled If the captive power plant (CPP)

fails, charges for back-up or stand-by power from the grid are twice thenormal rate for captive plants

No formal policy for purchase ofcogenerated power (in most of thestates)

It is estimated that about 30% of thetotal energy requirement of the Indianindustry is currently met through inhouse power plants. The state-wisecaptive capacity in 1998 is given in thetable overleaf:

Annexure III.2 CAPTIVE POWER SCENARIO IN INDIA

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Annexure III.2 2

Based on the fuel type used for captivepower generation about 45% of power

generated is from steam, 40% fromDiesel and 15% from Gas/Naphtha.Captive contribution by various industrytypes is as follows:

The feature of the policy ofthe states with respect topromotion of captive powerplants and cogeneration is asfollows:

Orissa

The permission for settingup Cogeneration/captivepower plant will have tobe obtained from theOrissa ElectricityRegulatory Commission(OERC)

The capacity of thecogeneration/captive power plant willbe limited to the extent required tomeet 100% of the heat and powerrequirement of the industriesconcerned on a sustained basis or toa larger extent necessary for theeconomic viability of the project

Surplus power from such plantswould be purchased by the GRIDCOafter negotiation on a project toproject basis

GRIDCO will permit wheeling ofpower over its transmission systemsubject to carrying capacity of thetransmission system. It will alsoallow sale of surplus power by theindustry to other industries withinand outside the state to the extentpermitted by State government. Bi-lateral sale to the other state will bepermitted on a specific approval ofthe state government

Interconnection of theCogeneration/captive power plantwith the State Grid would be at thecost of industry satisfying thetechnical requirement

The Cogeneration/captive powerplant may beset up either bythe promotersthemselves orby a separatecompany andshall abide byall relevant Actsand Rules inforce primarilythe IndianElectricity Act,1910, theElectricitySupply Act,1948 and

State

Installed

Capacity

(MW)

Captive

Capacity

(MW)

Andhra Pradesh 8204 1220

Assam 1078Bihar 4656 614

Delhi 1436

Gujarat 8376 1505

Haryana 882 335

Himachal Pradesh 3570 32

Jammu & Kashmir 1536 3

Karnataka 3462 1045

Kerala 1766 151

Madhya Pradesh 7173 1333

Maharashtra 11072 570

Meghalaya 239

Orissa 3243 1544

Punjab 2620 311

Rajasthan 2176 528

Tamil Nadu 8271 1107

Uttar Pradesh 12473 1240West Bengal 6515 786

Total 89167 12322

Source: Power Line Research

Industry

Capacity

(MW) % Share

Cement 1223 9.9

Chemicals 2076 16.8

Electronics 59 0.5

Engineering 2479 20.1

Jute 207 1.7

Metals & Minerals 2404 19.5

Miscellaneous 784 6.4

Paper 473 3.8

Services 80 0.6

Sugar 706 5.7

Textile 1303 10.6

Unclassified 530 4.3

Total 12322 100

Source: Power Line Research

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Annexure III.2 3

Orissa Electricity Reform Act, 1995

Gujarat

Any industrial undertaking to set upcaptive power plant requires theconsent of the Gujarat ElectricityBoard (GEB) under section 44(1) ofthe Electricity (Supply) Act, 1948

Banking of electrical power withGEB/Licensee would not bepermitted

Permission for installation of standbygenerating sets to work as additionalsource of power would be permittedup to two times the consumerscontract demand/ contracted loadwith GEB/Licensee or demandequivalent to capacity of its ownregular source of power supply

Wheeling of electrical power fromcaptive power plant of an industrialcompany to the other industrial unitswithin the same company or toany/all industrial units of its groupcompanies is allowed. Minimumquantity of power to be wheeledshall not be less than 5% of theinstalled capacity of the captivepower plant or 5MW, whichever ismore, among the group companiestaken together subject to thecondition that supplying companyconsumes at least 50% of thegenerated power

Wheeling charges are 13.5 paisa perkWh and 21 paisa per kWh forpower delivered at EHV and HVlevel respectively subject to revisionfrom time to time

Wheeling of power is also notallowed when system frequency is51 Hz and above

No night hour tariff concession shallbe admissible for power consumed/

drawn from the grid during nightperiod

System losses shall be consideredas 10% for power delivered at EHVand 15% in case of power deliveredat HV and the same would bededucted from the account ofrecipient unit

The rate for purchase of surpluspower would be decided by GEBand will depend on the fuel beingused and would be on cost plusbasis, where the fuel cost will bedecided by GEB on normative basisfor each quarter for each type of fueland gross calorific value

The State government isempowered to prescribe terms andconditions relating to electricitysupply and tariff for such supply

The electrical energysupplied/wheeled to differentrecipient units of group companiesfrom captive power plant of asupplying company would besubjected to payment of ElectricityDuty as per schedule I of theBombay Electricity Duty Act, 1958and Tax on sale of electricity as perthe provisions of Gujarat Tax on saleof electricity Act, 1985, as amendedfrom time to time

Note: In an recent policyannouncement, Gujarat governmenthas reduced the period of exemptionfrom payment of electricity duty tofive years for new captive powerplants (CPP) commencing powergeneration after March 31, 1999

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Annexure III.2 4

Maharashtra

The permission for installation andrunning the captive power plant willbe granted by the government andthe capacity of the CPP will belimited to cover the existing demand(MW) plus 1/3 of existing demand inMW or demand in MW for futureexpansion

Third party sale is allowed and inthis case a tripartite agreement willhave to be signed between theBoard, CPP owner and the thirdparty receiving power from CPP

CPP can sell surplus power tomaximum two industrial units and isalso restricted up to 25 percent ofthe generated units (kWh)

Captive generating company or anyother company intending to sellsurplus electricity to third partieswould require a prior permissionfrom the Energy Department of theState Government under section 28of the Indian Electricity Act 1910

The wheeling charges andtransmission losses are determinedin terms of distance transmitted. Thewheeling charges and transmissionlosses are determined as 2% and5% respectively for a distance of 050km; 4% and 8% respectively for adistance of 50200 km; and 6% and10% respectively for a distanceabove 200 km

Rate at which surplus power wouldbe purchased would be decided byMSEB and it will not purchase anypower during night hours, that is2200 hrs to 0600 hrs

In case of planned shut down of theCPP, the excess demand recordedover and above the revised contractdemand will be charged at double

the normal demand charge rate ofthe respective tariff in force fromtime to time

Uttar Pradesh

Presently, the transmission anddistribution system of the UttarPradesh State Electricity Board(UPSEB) is not in a position tohandle any further load. However,the wheeling of electricity is allowedon a selective basis provided thecaptive developers pay 15%wheeling charges of the energyreceived

While fixing the tariff for captivepower plant UPSEB will not sharethe fixed charges (interest on loans,depreciation, O&M, income tax, etc.)for the captive power plant. Howeverthe UP Government may share thisfixed charges by way of soft loan,subsidy etc. as the consumer isinstalling the captive power plantprimarily for meeting his load due tosophistication of the plant which mayaffect its functioning due to qualityvariation in UPSEB supply system

The board control room may directcaptive power plant control room toregulate the export during the nighthours from 2200 hrs to 0600 hrs

West Bengal

Transmission and wheeling of powergenerated: The Wheeling facility willbe provided by the WBSEB/CESC ata uniform wheeling charge of 2% ofcost of power wheeled, irrespectiveof the distance from the generatingstation

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Annexure III.2 5

Banking facilities: The board permitsthe electricity generated to bebanked for a period of six months.

An industrial undertaking notcarrying on continuous process ofproduction may draw power from thebank at any time of the day exceptduring evening hours

Sale of power to WBSEB/CESC:The generated power not used bythe industrial undertaking within aperiod of six months will be deemedto have been sold to theWBSEB/CESC

Tariff for sale of power will bedetermined for each generatingstation separately uponconsideration of various factors suchas generating cost based on totalinvestment (less central govt. grant),debt equity ratio, depreciation, O&M,return on equity, debt serviceconditions, etc., as is done for largethermal/hydro power generatingstations

annexure 3.2

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