CASE NO. 6 of 1998

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

For Petitioner:
Shri S.K. Tamotia, President
Shri C.B. Agrawal, Vice President of M/s. Aditya Aluminium Project.

For Affected Party:
Shri B.P. Rekhani. General Manager
(Regulatory Affairs Unit), GRIDCO.

Date of argument: 17.07.98

Date of Order : 17.08.98

M/s. Aditya Aluminium Project, a division of Hindalco | stries Ltd., IDCO Towers, 9th Floor, Janapath, Bhubaneswar - 751 007, has applied for grant of consent for setting up a 3X25 MW Co-generation Power Plant (with one unit of 1X25 MW as a stand-by) at Kansariguda in the revenue District of Rayagada for its alumina refinery project, designed to produce Alumina of one million tonnes per year.

2. Some of the relevant facts mentioned in the application may be noted below:

Hindalco, a flagship company of Aditya Birla group, is a premier aluminium producing company having already established an alumina refinery of 3,50,000 TPY and smelter plant of 2,10,000 TPY capacity at Renukote (U.P.) and a CPP of 425 MW capacity at Renusagar (U.P. )

2.1 M/s Hindalco Industries Ltd. signed a Memorandum of Understanding (MOU) with Orissa Mining Corporation 29.03.97 for exploitation of bauxite deposits in Rodingamali and Pottangi (in the District of Koraput) with the objective of setting up an alumina refinery at Kansariguda (in the district of Rayagada) and a smelter plant at Lapanga (in the district of Sambalpur), in the name of Aditya Aluminium Project(AAP)

2.2 Considering the quality of bauxite available in the mines at Kodingamali and Pottangi, the medium pressure digestion process, which is a time-tested Bayers Process, is proposed to be adopted. Steam is an essential requirement for digestion in the alumina refinery process. Steam is further required for maintaining water balance in the alumina circuit. That apart, the cheapest fuel for steam generation which is abundantly available in Orissa is coal and a coal-based co-generation plant is a time tested and well proven in alumina industry and elsewhere. Therefore, the coal-based steam plant has been proposed to meet the requirement of process steam of alumina refinery with co-generation of electric power.

2.3 Furthermore, technically, the process requires a substantial quantity of steam for digestion and evacuation at low pressure. Therefore, the applicant has proposed that the steam required for the process may be generated at high pressure by expanding the same through steam turbine to the required pressure level of the process steam. This will provide better efficiency to steam generation plant which will also generate power as a by-product utilising energy available by expansion of steam.

2.4 It is further indicated in the application that the normal power generation level of 36 MW will generally meet the requirement of alumina refinery and associated infrastructures which may go up to 40 MW during peak period. Therefore, for power generation, three extraction-cum-back pressure turbines each of about 25 MW capacity (taking into consideration average 80% generating factor due to variation in the process steam requirement) are required to be set up, so that one of the unit could be utilised as a stand-by unit.

2.5 So far as unit cost of generation of power is concerned, it is mentioned in the application that the cost of generation is Rs.187.12 Paise per unit taking into consideration the average PLF at 80%, the corresponding fixed and variable costs being Rs.1105.27 millions and Rs.704.39 millions respectively.

3. Another admitted position, though not specifically pleaded, is that the petitioner has already been granted consent for setting up of a 650 MW (5X130 MW) coal-based thermal captive power plant near Lapanga in e revenue district of Sambalpur (Orissa) for its alumina smelter plant designed to produce 2.3 to 2.5 lakh tonnes per year by this Commission vide Case No.4/98, while this co-generation captive power plant for which permission is sought for is meant for its, as stated earlier, alumina refinery near the mines site.

4. M/s Grid Corporation of Orissa Ltd. (GRIDCO), the Affected Party of this case, in its counter, has raised, inter alia, the following objections:

1. The additional cost of equipment involved for producing steam at higher pressure has not been apportioned towards the unit cost of generation of power.

2. The unit cost of generation of power has been computed by considering the energy generation as 350 MU but as per the heat balance diagram, the approximate annual generation of energy is of the order of 236.52 MU. Hence, the unit cost of generation of power should be calculated on the basis of 236.52 MU only and not more than that. Taking into consideration, the requirement of energy of the petitioner, M/S GRIDCO is in a position to supply power at an unit cost of Rs.2.80.

3. The consumption of coal at 88 TPH is incorrect. In fact, it should be 96.2 TPH if the average GCV of 3050 K.Cal/Kg. is taken into account. Similarly, the unit cost of generation of power should have been computed taking the rate of depreciation at 7.84% instead of 5%.

5. The petitioner, in his letter No.IR/AAP/PROJ/1201/1002 dt.6.6.98 clarified the above objections raised on behalf of the Affected Party.

6. In a pre-hearing conference among the Director (Tariff), Director (Engg.) and the representatives of the petitioner held on 25.6.98, it was pointed out that (i) the Detailed. Project Report (ii) Method of interconnection with GRIDCO and the cost of such interconnection have not been furnished by the petitioner. It is, however, pointed out that the revised cost estimate of the generation of power furnished to the Commission though appears to be acceptable should also be furnished to the Affected Party and the changes made in estimating the revised cost of generation of power should be supported by an affidavit.

6.1 In response to these objections raised in the pre-hearing conference, the petitioner vice his letter No. IR/AAP/PROJ/1201/1121 dt.l3.7.98 furnished revised cost of generation, single line diagram and cost estimates of interconnection.

7. In an application u/s 44 of the Electricity (Supply) Act, 1948 (hereafter, for short, the Act, 1948) read with Section 21 (3) of the Orissa Electricity Reforms Act, 1995 (hereafter' for short, the Act, 1995), the following points arise for consideration:

1. Whether the electric energy required by the petitioner could be economically supplied by the licensee; and

2. Whether the licensee (Affected Party) has the capacity to supply required quantity of electric energy sufficient for use and own consumption of the petitioner.

8. Heard arguments at length from Shri S.K. Tamotia and Shri B.P. Rekhani, for and against the consent sought for.

8.1 In the first place, Shri Tamotia put forth that GRIDCO has not been able to establish that it can supply power at a rate cheaper than the cost per unit of the petitioner's Co-generation Power Plant. In this connection, he further submitted that alumina refinery plant being a power intensive unit, the feasibility of the plant is anchored upon generation of energy at the cheapest cost and in fact, this inevitability is the marrow of the project.

8.2 The staff of the Commission have analysed the above aspect and have supported that the cost of generation of power from its Co-generation Power Plant by the petitioner will be cheaper than the GRIDCO 's present rate of supply even if it is in a position to supply the required quantity of energy.

Shri B.P. Rekhani, the authorised representative of GRIDCO agreed that the cost of generation of power from the CPP based on co-generation will be cheaper than the present rate of GRIDCO's supply.

8.3 Thus, regard being had to the submissions and the consensus arrived at between the parties which is again compatible with the costing of the staff counsel, the Commission is of the opinion that GRIDCO is not in a position to supply power to the petitioner economically and that the cost production of power by the petitioner from its Co-generation Power Plant will be cheaper than the rate of the GRIDCO.

9. Adverting to the question of steady, reliable and adequate power supply, Shri Tamotia canvassed that a single outage exceeding half an hour will cause immeasurable loss in terms of money as well as equipments and therefore, its critical equipments in the alumina refinery should always be provided with alternative Captive Power supply. In this context, he further pointed out that given the size of the Alumina plant, it is technologically not viable to have such a plant without a Co-generation Power Plant unit.

10. The Commission staff, however, argued that it would not be advisable to accord permission for setting up the Co-generation plant as applied for in the absence of a Detailed Project Report (DPR). Therefore, they urged for deferment of the consent as required under Sec. 44 of the Act, 1948 r/w Sec. 21(1) of the Act, 1995 until submission of the said report.

10.1 Mr. Tamotia, on the other hand, assured the Commission that there will be no major change in the DPR regarding the unit cost of generation of power, cost of interconnection of the proposed co-generation plant with the transmission system of the Affected Party and technical parameters of the plant. He further contended that preparation of a DPR depends entirely upon the amount of consumption of the F-Grade coal and cost thereof which is to be negotiated with the Ministry of Coal and that the Ministry of Coal would not entertain coal-linkage proposal without a permission having been granted by the Commission as required under the Supply Act as well as Reforms Act.

11. On a consideration of the rival contention raised at the time of argument, it appears that, even though, Mr.Tamotia assured the Commission that there would not be any large scale or major difference in the unit cost of generation of power, cost of interconnection of the proposed co-generation plant with the transmission system of the Affected Party and technical parameters of the plant, yet he admitted, albeit indirectly, that there is scope for changes and variations in the DPR, may be in minor particulars. In other words, it is apparent that the apprehensions of the staff counsel is more or less justified and correct because if a blanket permission under the above provisions of the Supply Act and Reforms Act is accorded, without insisting upon submission of a Detailed Project Report by relying upon the facts and figures placed, at present, before this Commission, it may not be possible to annul the same even if the petitioner introduces substantial changes in the DPR relating to financial, technical and other parameters of the project.

12. Thus, in the facts & circumstances indicated above, the Commission is not in a position to grant consent as envisaged under the provisions of the Supply Act as well as the Reforms Act in the absence of a Detailed Project Report. Be that as it may, as has been urged by Mr.Tamotia and also keeping in view the interest of the petitioner, the Commission is of the view that an "in-principle" approval of the project should be accorded relying upon the materials adduced, at present, before this Commission. Such an approval may safeguard its interest to obtain necessary clearance from the Ministry of Coal and also help finalise a Detailed Project Report.

12.1 Accordingly, the petitioner is accorded "in-principle" approval for setting up Co-generation power plant as proposed to be set up at Kansariguda. The applicant is directed to come up within six months with a Detailed Project Report on submission of which the grant of consent shall be taken up according to law. In case, the Detailed Project Report is not furnished within the stipulated time nor any extension of time for its submission is obtained before the expiry of the stipulated period, the in-principle approval will be deemed to have lapsed without further reference to the parties.

Back to "Orders"