(Economic Times - New Delhi - November 27, 2001)
The Railways
could soon be scouting lor a joint venture partner to set up power plants. They
are exploring several options to escape the excessive power tariffs levied by
SEBs making use of their current monopoly in power distribution. These include
direct bulk purchases from central agencies like NTPC, buying power from
independent producers or, setting up a captive power business in a joint
venture.
The new
Electricity Bill, which was introduced in the last session of Parliament,
encourages setting up of captive plants by bulk consumers and allows direct
sale of power from generators to bulk consumers. Although, the bill is yet to
be passed and is expected to become an Act only around the monsoon session,
talks have already begun between the railway and power ministries.
The Railways are
already procuring power directly from NTPC for a section in the Northern
Railway - between Ghaziabad and Kanpur. This was done with clearance from the
Centre but the state electricity board has taken the Railways and the central
utility to court. Discussions are on with the power ministry to cover more
ground under this arrangement, sources said. NTPC is looking at direct supply
lines in the Western and Eastern regions.
According to
officials in the power ministry, since the new bill already provides for the
enabling clauses, they have told the Railways to initiate disussions with
central power utilities and other power developers. "We have asked them to
go in for lOO per cent electrification and that would mean a significant
business for the power sector."
The Railways have
a good track record of settling their dues. But this does not mean that the
entities that generate the power consumed by the Railways receive their
payments. This is because the Railways have to make their payments to the SEBs,
who buy the power from generating companies like NTPC and sell it to the
Railways at a higher tariff. The SEBs often do not pass on the entire amount
they receive from the Railways to NTPC or other utilities. The SEBs owe central
utilities close on Rs 40,OOO crore. Thus although, both Railways and NTPC could
have a healthy business relationship, the SEB route is a liability for the
power provider.
Railway officials
said the proposal was at a preliminary stage and captive power generation can
only be in a joint venture. The Railways do not have expertise in the power
business and the justification for foraying into this area is lower tariff.
"So, we will have to chalk out a power purchase agreement with the joint
venture partner with tariff as the key parameter," sources said. Besides,
entering the power business makes sense for the Railways which have major
targets to be achieved in the area of electrification.
Although, costs
are high in captive plants in the initial years, they tend to get reduced over
the years. Moreover, if the excess power can be sold to the grid, which again
is a provision in the bill, it makes sense for Railways to set up such
ventures. But, on the flip side, it takes the organisation away from its core
business of transportation. It already has a host of non -core functions as it
has been developed as a highly vertically integrated model, experts point out.
Added to this is the severe resource crunch that the organisation is under.
At present,
Railways purchase power from 17 state electricity boards and two power
companies. Of these states, electricity regulatory commissions are functioning
in 11. The SERCs decide on revising the electricity rates periodically after
examining proposals from bulk consumers.
In the current
financial year, the Railways have managed to bargain a tariff reduction in
three states, avoided increase in two states and limited the increase in two
states. There has been no response on tariff reduction from the remaining
states. However, Railways has so far not been able to get a tariff that is
linked to the real cost of electricity supply.