Group captive power plants find takers

Two years after the policy for group captive power plants came into being, some action has started with companies like Wartsila and KSK Energy setting up plants for a group of industrial consumers.

"Industrial consumer segment is growing at a fast pace, which doesn't want to depend on state electricity utilities for its power needs because they are expensive and unreliable," said S Kishore, executive director, KSK Energy.

Hyderabad-based KSK Energy, which already has 58-Mw and 135-Mw group captive plants in Tamil Nadu and Rajasthan respectively, is also setting up a coal-based 450-Mw group captive plant at Wardha in Maharashtra.

For this purpose, KSK has set up a special purpose vehicle (SPV) "" Wardha Power Company Pvt Ltd (WPCPL). The power produced here would be consumed by companies like Chemplast, Brakes India and Laxmi Mills, among others.

The payment of extensively high tariff in Maharashtra for the power utilities led KSK to this project, said Kishore and added that the power from this plant would be sold at Rs 2.85 per unit, which is very low compared with what the Maharasthra State Electricity Board charges the industrial sector.

Group captive power plant, unlike an individual captive power plant, is a unique structure where a developer sets up a power plant for collective use of many industrial consumers who should have 26 per cent equity in the plant and must consume 51 per cent of the power produced.

These are specially beneficial for small and medium scale industries that don't have the wherewithal to set up or manage their own power plants but need power to run their businesses.

Also, through such an arrangement the industries escape paying the cross-subsidy surcharge levied by the state regulators, which results in high tariffs for the industries.

The government, through group captive power plants policy, gave an alternative route to the industries. Experts say the concept would pick up in the states where industrial tariffs are very high.

According to Kishore, to set up a group captive plant, a developer must be a neutral player who would just operate and manage the plant but would not offtake power.

Besides getting regular, reliable and cheap power, the transmission and distribution losses also come down through group captive power plants because the power is produced locally and consumed locally, said SK Misra, chairman, Chattisgarh Regulator Commission.

The reason why this concept was slow to become popular is that it has been only two years since the policy was made for group captive power plants and also because of fuel constraint and difficulty in getting land.

"They would pick up in the next four to five years, although not on a large scale, with more number of players," said a Mumbai-based power sector analyst.