CASE NO. 21 of 1997

ORDER No.005 DATED 4th NOVEMBER, 1997

Shri S.C. Mahalik, Chairman
Shri A. R. Mohanty, Member
Shri D. K. Roy, Member

In the matter of application of M/s. Indian Aluminium Company Limited having their Registered & Head Office at 1 Middleton Street, Calcutta - 700 071 and their liaison office at 1295, Forest Park, Bhubaneswar - 751 009.

M/s. Indian Aluminum Company Limited - Petitioner

For the Petitioner:
Shri B.K. Patnaik, General Manager(Coordinator).

For the affected party :
Shri N.G. Nath, Chief Engineer (PP), GRIDCO.
Shri K.K. Nayak, Manager (Ele.) PP-I, GRIDCO.

1. An application by M/s. Indian Aluminium Company Limited (INDAL) was initially submitted to the Commission seeking consent under Section 44 of the Indian Electricity (Supply) Act, 1948 (hereinafter referred to as Supply Act) read with sub-section (3) of Section 21 of Orissa Electricity Reform Act, 1995 (for short the Act) for setting up Captive Power Plant of 720 MW (6X120 MW) at Bhadarpali in Sambalpur District.

2. Finally, the applicant filed the petition seeking consent on 26th August, 1997 along with the replies to the queries made by the Commission on their earlier application.

3. The above petition was decided to be disposed of through a proceeding and Case No. 21 of 1997 was assigned for the purpose. Notice was served on M/s. INDAL and to M/s. Grid Corporation of Orissa Limited (GRIDCO), the affected party for personal hearing on 4th October, 1997. In response to such notice, Gridco submitted their counter on 26th September, 1997. Both the petitioner and GRIDCO appeared on 4th October,1997 through their authorised representatives as indicated earlier,

4. M/s. INDAL in their petition indicated their intention to set up a green field Aluminium Smelter in Western Orissa with initial capacity of 1,15,000 TPA (2,30,000 TPA in the final stage). The proposed location of the smelter plant is at Bhadarpali in Sambalpur Dist. about 27 Km north of Sambalpur. Alumina for the Smelter plant will be procured from their proposed Alumina Plant of Utkal Alumina International Ltd. located in Rayagada Dist. The plant will depend on Hirakud Reservoir for its water requirement. The petitioner proposed that the electric power requirement for the Smelter plant will be about 240 MW in the first phase and another 230 MW later on in their second phase. They have stated that electric power is the most important cost input for a Smelter plant and reliable power supply a. low cost is essential for its economic competitiveness. It is essential to have an efficient low cost power generating plant optimally located for reliable sources of coal and water. With this in view, they have proposed to set up a coal based conventional captive thermal power generating plant of 6nos. generating units each having capacity of 120 MW for supplying power to the smelter plant at Rengali (31 Km north of Sambalpur). The coal for this captive power plant would be procured from a captive coal field with a capacity of about 150-200 - million ton reserves. The petitioner have submitted a pre-investment report on the CPP prepared by their Consultant M/s. Development Consultants Limited, Calcutta.

5. The petitioner in their correspondence with the Commission dtd. 02.07.97 changed their earlier cost data in as much as capital cost/MW reduced from Rs.53.00 million to Rs.42.00 million based on budgetary offer of M/s. BHEL. Similarly, they have changed their generation cost/unit by adopting plant load factor of 80% as against earlier plant load factor of 68.5% based on CEA norm. Therefore, it is necessary to call for a full-fledged Detailed Project Report (DPR) to firm up the cost of generation as it has got an important bearing for considering the grant of consent for the CPP.

6. M/s. Gridco in their counter have expressed their anxiety about the inter-connection of such a large generating station of 720 MW capacity with the State Power Grid in absence of technical data or exchange of information with the petitioner. M/s. Gridco have also expressed their anxiety of loss of revenue to Gridco to the extent of power requirement made by M/s. INDAL CPP as it would adversely affect the consumer mix on the tariff structure of Gridco. Gridco in their Director (Commerce) letter No. 2637 dtd. 04.11.96 to the Commission has expressed their commitment of capacity addition of 1100 MW by the year 2002 and another 2000 MW by 2005 in their generation planning and also indicated that appropriate action are being taken to procure the above additional power. M/s. Gridco in their said letter has indicated that. in case proposal is received from M/s. INDAL, Gridco may purchase surplus power to the extent required by M/s. INDAL plant with consent of Regulatory Commission. The terms of purchase would depend on the nature of supply in terms of capacity or energy required by M/s. INDAL has not given necessary requisition to Gridco about their requirement of power for the smelter plant load before proceeding with the proposal for green field Captive Power Plant. In spite of these reservations, Gridco have stated that they may have no objection for setting up the Captive Power Plant subject to certain conditions specified by them.

7. The Commission appreciates the necessity for economic and reliable power for viable operation of a smelter plant. However, for granting permission under Section 44 of the Indian Electricity (Supply) Act, 1948, the Commission has to examine whether the possibility of least cost power availability have been fully explored before the proposal to set up Captive Power Plant is considered. We observe that there has been no adequate dialogue between the applicant and the Gridco on the matter of availability of required quantity of power during the time frame. It appears that firm requirements for power have not been conveyed to the Gridco. Secondly, the applicant has changed the requirements and the cost of generation during the course of the proceeding and therefore, Gridco has not been able to adequately examine and comment on these aspects. This would have been possible if a Detailed Project Report had been submitted to the Commission along with the application. In the absence of detailed project report the Commission is unable to take decision regarding grant of consent on the basis of available information which is inadequate. We, therefore, conclude that on the basis of the applicant's information, the Commission does not consider it appropriate to grant consent under Section 44 of the Indian Electricity (Supply) Act, 1948. However, we observe that the petitioner is at liberty to file a fresh application along with a Detailed Project Report clearly indicating their power requirements and the cost of generation. The application when filed should indicate the results of dialogue with the Gridco with regard to availability and the cost of power.

8. Copy to be given to the petitioner and also to affected party M/s. Grid Corporation of Orissa Limited and the Government of Orissa, Department of Energy.

Sd/-
(D.K. ROY)
MEMBER

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