Condensate May Be Offered As Alternate Fuel For Power Projects

The government may alter the liquid fuel policy and offer condensate as an alternate fuel to promoters of power projects, who are proposing to use either naphtha, furnace oil or LSHS.

The government is considering this move after some sections in the government pointed to the adverse impact naphtha imports would have on the balance of payments position.

Condensate is considered to be a cheaper and more reliable alternative to naphtha, which is fast emerging as the most popular fuel for power generation. Similar objections have also been raised by some private power operators and the Confederation of Indian Industry (CII), which had made presentations to the government on the inadequacies of the liquid fuel policy. Acknowledging that the government has made some crucial changes in the fuel supply agreement, the industry feels some problems still need to be resolved.

 

Apart from asking the government to increase the band of fuels for power generation, independent power producers (IPPs), along with financial institutions and state electricity boards, have suggested reducing import duties on some liquid fuels.

Estimates show the power tariffs would come down by 25-30 paise per unit if import duties on certain fuels are removed. Condensate, for example, attracts a duty of 30 per cent as it is classified as crude. Sources said the removal of this duty would make condensate much cheaper as compared to naphtha.

FIs have said that some state electricity boards are not in a position to absorb power from naphtha-based projects.

The IDBI had refused to arrange finances for the RPG-promoted naphtha-based Dholpur power project in Rajasthan as it felt the final cost of power would be too high for the board to sustain. Official sources said the government was considering the proposal.

At present, most promoters of liquid fuel power projects have opted for naphtha. Industry sources feel there is a need for an alternate fuel as naphtha is at best a short-term fuel. Naphtha, however, has some associated problems. It is generally not used in power generation and its demand-supply position is quite unfavourable. IPPs also feel that transportation of naphtha by rail could be a dangerous proposition as it is volatile in nature. They feel that condensate is similar to naphtha in terms of its heat content and in being environment-friendly.