Govt May Put Naphtha Under Ogl

The petroleum and natural gas ministry is considering a proposal to allow import of naphtha under the open general licence (OGL) for use as fuel by independent power producers (IPPs).

At present, naphtha is on restricted list and attracts a 35 per cent import duty. Only fertiliser units are allowed to import it through OGL for use as feedstock.

It is proposed that IPPs should be allowed duty-free import of naphtha only if they enter into long-term contracts with suppliers so that the fuel supply to the power plants is assured.

The proposal comes in the wake of the ministrys quandary over the fact that while it has allocated naphtha to 11 states for generation of 12,000 mw of electricity, the state governments have signed memoranda of understanding (MoUs) with IPPs for generation of 30,000 mw of power through liquid fuel.

 

The proposal to put naphtha on the OGL to enable use in such power projects was disclosed by assistant secretary in the ministry, Devi Dayal, at a press conference which was attended by petroleum secretary Vijay Kelkar and petroleum minister Janeshwar Mishra.

In fact, several discrepancies have been pointed out in the allocation of naphtha to various states by the power ministry. While, on an average, each of the state should have been allocated fuel for generation of 1,000 mw of power, the allocation is much higher in the case of some states and lower in the case of others.

For example, the power ministry has allowed Maharashtra to generate 1,800 mw and Andhra Pradesh 1,200 mw of power through liquid fuel. But, Tamil Nadu and Kerala have been allocated naphtha for producing only 800 mw of electricity.

The petroleum ministry argued that it has informed the power ministry of the quantity of naphtha available with it for use by IPPs, it was up to the power ministry to allocate naphtha equitably among all states.

However, the power ministry argues that it was the petroleum ministry which had initially indicated to it that adequate quantity of surplus naphtha was available within the country to generate huge quantity of electricity in the country.

Based on this assurance, states had entered into a number of MoUs with IPPs, some of whom had already invested large sums in their projects, before the government was told that naphtha for generation of only 12,000 mw of power could be made available.

The power ministry argues that under such conditions, it had no alternative but to allocate naphtha on the basis of the work already done on various projects in the states.

Even so, many of the IPPs, who have taken steps to implement their projects, have been forced to scale down their capacities.

In case naphtha is put on OGL, it will bring cheers to the IPPs.

But, the move could also spur adulteration of petrol to an unprecedented degree. Naphtha can be easily mixed with petrol and costs only half as much.

Another problem with naphtha concerns its storage. It is highly inflammable and can explode easily. It is not known how the IPPs would put up their own highly-specialised storage facilities at ports for the imported naphtha.

Meet on model fuel pact

The government has drawn up a model fuel supply agreement for liquid fuel-based power projects being promoted by independent power producers (IPPs).

The petroleum ministry will discuss the agreement with the IPPs at a meeting convened in Mumbai on Friday.

The ministry has allocated liquid fuel for generation of 12,000 mw of power in 11 states. It is hoped that the government would incorporate IPPs suggestions in the final draft which would be placed before the Cabinet for approval.