CASE NO. 2 of 1996

DATED BHUBANESWAR THE 20th JANUARY, 1997

In the matter of application by M/s. Rexon Strips Limited, Rourkela.

For the petitioner- Shri R.S.Kejriwal, Managing Director

Present- Shri S.P.Rath, Executive Engineer (Commercial) representing Grid Corporation of Orissa Limited

The opinion of the Commission delivered by Shri S.Som, Chairman

S.SOM:- This is a petition under Section 44 of the Electricity Supply Act, 1948 (hereinafter referred to as the Supply Act) read with sub-section (3) of Section 21 of Orissa Electricity Reform Act, 1995 (for short the Reform Act) filed by M/s. Rexon Strips Limited (Sponge Iron Division). The facts of this case fall within a small compass and can be briefly stated.

2. The petitioner is a Joint Sector company set up with financial assistance from Industrial Promotion and Investment Corporation of Orissa Limited (IPICOL) and Orissa State Financial Corporation (OSFC) running a sponge iron plant At : Kumakela, Via Lathikatha, Rourkela. For their unit they have taken power connection with contracted demand of 200 KVA from OSEB under an agreement with the later executed on 04.07.94. The unit started production on 03.01.96. According to the petitioner, there were frequent interruption in power supply under the agreement by the Board and later on by Gridco. The unit has applied for installing a D.G. set of 280 KVA. Subsequently, the rating of the proposed generating set was stated to be 380 KVA and finally it has been indicated that it is of 365 KVA. As the contracted demand was 200 KVA and as it was reported by the petitioner that he had already purchased a D.G. set and installed it, notice was issued by the Commission to the petitioner for personal hearing. In response to the notice, the petitioner appeared on 09.01.97 through its Managing Director and indicated the following.

3. The unit is taking supply of electricity from 33 KV line of the Board passing near the unit. But, there has been frequent interruption in supply of power right from the beginning. It was submitted that even during installation phase, because of frequent interruptions, the contractors who were fabricating machinery at the site had to instal generating sets for ensuring dependable supply of power. As already mentioned, the unit was commissioned on 03.01.96. From the beginning the interruption was on an average nine times daily. It was also indicated that the plant of the petitioner runs continuously for 90 days at a stretch with a stoppage of five days for maintenance and for an interruption of even two minutes, the entire production cycle is disturbed and 'B' grade material is produced resulting in substantial financial loss to the petitioner. The petitioner purchased a D.G. set on 13.03.95 and installed it on 29.06.95. Prior to installation they applied on 09.05.95 to the Executive Engineer, OSEB at Rourkela in proper form asking for permission to set up the generating set for stand by power supply. Reminders were also sent on 12.07.95 and 13.09.95. In response, the S.E (Commerce), Bhubaneswar in his letter dt. 14.11.95 asked the petitioner to supply certain information for consideration of his prayer seeking permission to instal the generating set. The required information was supplied by the petitioner in his letter dt. 09.02.96. The petitioner had also written to the Chairman of the Electricity Board on dt. 14.02.96 asking for remedial action in respect of frequent interruption of power supply. With the establishment of the Orissa Electricity Regulatory Commission the petitioner came up with his application on 22.08.96 enclosing previous correspondence with the Board asking permission to set up the generating set.

4. At this point, it will be necessary to refer to the legal provisions in this regard. Under sub-section (1) of Section 44 of the Supply Act, it is provided that notwithstanding anything contained in any other law for the time being in force or in any license, but subject to the provisions of this Act, it shall not be lawful for a licensee, or, any other person, not being the Central Government or any Corporation created by a Central Act to establish or acquire a new generating station except with the previous consent in writing of the Board. In other words before a generating set is installed prior permission in writing of the Board has to be obtained. Under sub-section (3) of Section 21 of Reform Act, it is provided that any person to whom the provisions of Section 44 of the Supply Act applies shall be required to obtain permission from the Commission instead of the Board as provided under that Section. That is how the petitioner is before us.

5. The first point to note, is that, the petitioner is a Joint Sector company set up with financial assistance from IPICOL and OSFC and it contracted for supply of power by Orissa State Electricity Board. Inspite of execution of contract, there has been, according to the petitioner frequent interruption in power supply resulting in considerable financial loss to the unit. At this point, it is relevant to note that inspite of notice, the GRIDCO the successor-in-interest of OSEB has not filed any report in respect of the petition. We have, therefore, to accept the petitioner's contention that there has been frequent interruption in power supply resulting in substantial loss of the production by the petitioner. We would also like to record that even ignoring the lapse of Gridco in not sending the report, the petitioner during the hearing before the Commission has been able to fully establish the fact of frequent interruption in power supply.

6. The second aspect of the matter is that the petitioner's contracted demand is 200 KVA as against which he has purchased and installed a D.G. set of 365 KVA which is of much higher rating. The petitioner has submitted that he has purchased a very well known brand of D.G. set named "Cater Pillar" (TIL Limited) and has submitted the copy of an advice from the company suggesting purchase of a D.G. set of 365 KVA as against the contracted load of 200 KVA. This is because in the manufacturing process, the petitioner requires direct current for certain D.C. motors and for converting A..C. to D.C. as A. C. is the normal supply by the Board, he had established a Thyristor which requires additional power. Moreover, in case of interruption, motors and machines have to come to full load at a time because of ongoing process of production and this also requires a higher rating of the generating set as against his contracted demand. We have considered this advice very carefully. While we accept both the contentions that because of the Thyristor, the petition requires more power and because in case of interruption the entire load is drawn instantaneously from the generating set, the rating of the generating set has to be higher than the contracted load, we are of the view that even taking these two factors in consideration, rating of his generating sets could have be somewhat lower than 365 KVA. It is thus clear that the petitioner has installed a generating set of higher rating than what needed by his contracted load and distinctive requirements of the load profile.

7. The third and the most important aspect of the matter that inspite of sub-section (1) of Section 44 of the Supply Act the petitioner has gone ahead and installed the generating set. This has two implications. Firstly, installation of D.G. set has been done without the consent of the Board and secondly, petitioner has not given any intimation to the Electrical Inspector for inspection before operating the D.G.set Therefore, Electrical Inspector has not checked the safety aspect of the installation. Serious notice has to be taken of the lapses. The other aspect of this matter is that the petitioner obviously has not been sending reports to the Electrical Inspector about the quantum of the electricity generated and consumed and is not paying any electricity duty on the units consumed from self-generation. It is understood that according the relevant Industrial Policy Resolution, exemption may be available to him from payment of electricity duty for a period ten years from the date of the commissioning of the D.G. set, but even then the liability of submission of statutory return on self-generation to the Electrical Inspector remains.

8. We have considered all the aspects very carefully. We have also noted the fact that the petitioner did apply to the Board for permission before actual installation of the generating set and had been repeatedly writing to the Board on that subject. It is also noted that the petitioner had also been repeatedly writing about the frequent interruption in power supply to his unit set up with financial assistance from IPICOL & OSFC. No material has been placed before us showing what action, if any, has been taken by the Board and the Gridco on the various petitions filed by the petitioner. In consideration of the above permission is hereby granted to the petitioner under Section 44 of the Supply Act read with sub-section (3) of Section 21 of the Reform Act for installing the generating set of 365 KVA. The permission shall be prospective in nature that shall be effective from the date of issue by the Commission. It is also ordered that a copy of this order should be sent to the Electrical Inspector who shall inspect the safety aspect of the installation and send a copy of the Inspection Report to the Commission. The question of levy and calculation of Electricity duty will no doubt be considered by the Electrical Inspector in the light of the statutory provisions and the provisions in the concerned Industrial Policy Resolution. We have noted earlier that the petitioner has established a generating set with a higher rating costing more money, thus enabling him to draw higher subsidy from the Industry Department than what he would have been entitled to in case he had established a generating set of lower rating. This, however, is a matter to be considered by the authority granting the subsidy. We order that the petitioner while applying for subsidy from the concerned authority should submit a copy of this order to that authority so that appropriate decision could be taken by the subsidy granting authority in the matter.

9. Subject to the above observations the petition is allowed.

10. Pronounced this day the Twentieth of January, 1997 in-the open court.

 Typed to my dictation and corrected by me.

I agree.

S/d
A.R.Mohanty
MEMBER

I agree.

S/d
D.K.Roy
MEMBER

09.01.97 Petitioner represented by the Managing Director of the Company. Gridco is represented by the Executive Engineer (Commercial). Heard the petitioner and representative of Gridco. The petitioner is directed to submit information on date of initial supply of power to the unit, date of purchase and installation of DG set, initial correspondence with OSEB/GRIDCO regarding agreement and supply of power, the provision of Industrial Policy Resolution, 1992 under which the petitioner wants to avail subsidy from the Industries Department, cost and specification of the DG sets, characteristic of the DG set for ensuring that full load for the unit could be taken from the DG set instantaneously and cost of generation per unit from Diesel Generator. Petitioner submits that information on the above points would be submitted by 15th January, 1997. The matter- is posted to 20th January, 1997 for orders.

20.01.97 Petitioner absent on call. Representative of Gridco is also absent. Order delivered in separate sheets. The petition is allowed in terms of the order. Copies of the order be sent to the Petitioner, Gridco and Electrical Inspector, Rourkela.

S/d
D.K.Roy

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