OERC - Case No.2 of 1998

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

M/s. Birla Tyres, At/P.O. Chhanpur, Dist. Balasore -Petitioner

Vrs.

M/s. Grid Corporation of Orissa Ltd.,
Janpath, Bhubaneswar -Affected Party

For Petitioner:
Shri Milan Kanungo, Advocate,
Shri M.R. Das, Sr. General Manager(Engg.)
Shri S.K. Nanda, Chairman of the Energy panel of CII(Eastern Region)

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

M/s. Birla Tyres, a manufacturing unit of rubber tyres, tubes, flaps, situated at Chhanpur, Via. Kuruda, Dist. Balasore has applied for permission u/s 44 of the Electricity (Supply) Act, 1948 (hereafter, for short, the Act, 1948) read with Sec. 21 (3) of the Orissa Electricity Reforms Act, 1995 (hereafter, for short, the Act, 1995) to set up an additional 6.25 MW Turbo Generator set to run as a co-generation captive power plant.

2. On 3rd March'97, the petitioner made an application to this Commission for granting consent under the above provisions of law for installation of an additional 6.25 MW T.G. Set furnishing therewith major specification (vice Annex.-I), detailed specification (vice Annex.-II) of the T.G. Set and a statement showing loss of production (vice Annex.-III) due to severe power interruptions over the last 2 years (1995 and 1996).

2.1 According to the application and data furnished, the petitioner wanted to install a co-generation captive power plant of the above capacity (6.2 MW T.G. Set) at its factory site at Chhanapur to run in isolation i.e. on stand-alone mode for production of automobile tyres, tubes and flaps. It further transpires from its application that while the peak requirement of the industry is 12.5 MW, it required annually 7.9 million units for its consumption. Further, according to the petitioner, it has already installed a 6.25 KW Captive T.G. Set and a 2X2270 KVA stand-by D.G. Set to meet their power requirement, permission for which had since been accorded by the Chief Engineer (Comm.), of the then Orissa State Electricity Board (OSEB) vice its letter No.10084 dt.7.7.93.

2.2 The petitioner has further pleaded that due to increase in production capacity from 118 MT/day to 143 MT/day at present, the peak demands of power having consequently increased to 12.5 MW, they require another T.G. Set of 6.25 MW to be installed at their work site, which the petitioner intends to run in stand-alone mode.

2.3 It further transpires from the pleadings that the unit cost of generation of power would come to Rs.1.48 without taking into consideration the cost of the boiler and Rs.1.66 even though, the proportionate additional cost (56% steam being used for power) of the boiler is taken into account; nevertheless the unit cost is much cheaper than the rate at which Gridco can supply power to them. At any rate, the increased steam demand can only be met by a 35 TPH boiler and cheaper power can be generated through co-generation if it is allowed to set up a 6.25 MW T.G. Set.

2.4 It is further averred by the petitioner that it was, at present, drawing 2 MW power from Gridco but the same was never stable and reliable. In support of this averment, a statement as per Annexure-III has been filed showing the number of power trippings and its duration (in minutes) from January'95 to December '96.

2.5 Mainly on these grounds, the petitioner prayed that consent to be accorded to them for installation of a 6.25 MW Co-generation T.G. set.

3. Gridco (Affected Party) in its letter No.Com-XV-3/93-RAU-7 dt.14.1.98 stated, inter alia, that a 220 kV line from Duburi to Balasore and auto transformers at Balasore Sub-station had already been commissioned augmenting the power supply and therefore it was in a position to meet the entire power requirement of the petitioner. It further averred that in the meanwhile, the petitioner has reduced its contract demand from 7.5 MW to 4.9 MW. Lastly it contended that the petitioner has not furnished accurate and proper cost calculation so as to justify its unit cost of generation as projected and as a result thereof, it is not comparable to Gridco's tariff.

4. Responding to the objections raised by the Affected Party in its letter dt.l4.1.98, the petitioner sent its parawise report on 16.2.98 by way of rejoinder.

4.1 In the first place, the petitioner asserted that it still continued to suffer on account of power failures and variation in the voltage and frequency resulting in huge loss whereas stable and reliable power supply was inevitable in a rubber industry like theirs, not only to avoid loss but also to obviate damage to its machines like PLC and Servo Amplifiers etc. In support of this assertion, the petitioner filed a 4 page annexure (vide Annex.I of the letter dt.l6.2.98).

4.2 Reiterating its earlier stand, it further asserted that the unit cost of generation of power from their T.G. Set would be a lot cheaper than the tariff fixed by the Gridco because of installation high pressure fluidised bed combustion boilers using "F" grade coal generating at 43 Kg/cm2 as per Govt. of India Guidelines and thereby reducing the pressure to meet the process requirement and co-generating required power from the-steam before use for process industry.

4.3 Finally, the petitioner reasserted with further facts & figures that the supply of power by the Gridco had never been stable and reliable because of interruptions and variation in voltage and frequency. The petitioner also pointed out, at any rate, Gridco can not supply steam which is required for their manufacturing process and therefore installation of one additional turbine is imperative.

5. On the first day of hearing (dt.23.2.98) on the objection raised by the Affected Party, the petitioner was directed to file a detailed cost calculation statement by 5th March'98 endorsing a copy thereof to Gridco. Eventually, the petitioner filed a Report on Co-generation Plant on 17.3.98 for installation of the Turbo Generator prepared by its consultant, M/s Development Consultants Ltd. (DCL), Calcutta.

5.1 In view of the above development, the Affected Party was allowed to file its response to the Report on the Co-generation Plant prepared by M/s D.C.L., Calcutta.

5.2 The first objection (vice letter No. Com.XV-3/93-RAU-26 dt.28.3.98) to the report on Co-generation Plant prepared by M/s D.C.L., Calcutta was that it did not indicate that the existing 3 boilers would not meet the steam requirement of the petitioner for production of 143 MT/day. At any rate, the cost of the additional boiler (4th boiler) and associated equipments have not been included to find out the unit cost of generation of power from the proposed co-generation captive power plant in shape of a T.G. Set.

5.3 The Affected Party further pleaded that when the estimated capital cost of the project has been worked out at Rs.1402.35 lakhs for a 6.25 MW CPP, the unit cost of generation would be in the neighbourhood of Rs.2.24 crores per MW which was very low. The petitioner has further pointed out that the auxiliary power consumption, the return on equity and rate of depreciation have been respectively estimated at 8%, 10% and 3.5% which should normally be fixed at 10%, 16% and 7.84%.

6. Finally, the Affected Party pointed out that although the power available from the addl. Turbo Alternator has been shown as 63,900 Units per day, yet the same figure has not been taken into consideration for calculating the fixed cost per unit.

6.1 After the above exercise, the next date of hearing of the Case was fixed to 18.4.98. On the appointed day, arguments were heard in part from both sides. Mr. Rekhani, the General Manager (RAW) on behalf of the Affected Party highlighted certain inconsistencies found in the application of the petitioner on one hand and its report on Co-generation Plant prepared by the DCL, Calcutta on the other, which are referred to hereinabove. Director (Tariff) and Director (Engg.) of the Commission while offering their views pointed out similar defects.

7. Since. the issues involved in this application, are of technical nature and the petitioner had no opportunity of meeting the objections raised by the Affected Party in its letter dt.28.3.98 and that of the Director (Tariff) & Director (Engg.), the Commission directed that the learned Counsel as well as the team of the officers appearing on behalf of the petitioner may hold a conference with the Director (Tariff) and Director (Engg) with regard to the queries raised by them so as to narrow down the same, if not to completely eliminate the same by way of mutual discussion and clarification. The petitioner was also permitted to file its replies to the objections raised by the Affected Party in its letter dt.28.3.98 as well as the queries of the Commission's staff on or before 30.4.98 separately.

7.1 Pursuant to this direction on 18.4.98, the petitioner through its authorised representative held discussion with the Commission's staff [Director (Engg.) & Direct (Tariff)] on 23.4.98 to meet the queries raised by them. The Commission's staff in their joint note on 16.5.9X recommended that subject to the approval of the Commission, consent may be given for setting up of a Co-generation Captive Power Plant, keeping in view of its power requirement and the unit cost of generation which is cheaper compared to Gridco's tariff.

7.2 In addition to this effort, the petitioner has also filed its reply supported by affidavit to the objections raised by the Affected Party on 28.3.98. It explained that in order to meet its production target of 143 TED 57 TPH steam is required and to comply with the statutory requirement of inspection necessitating approximately one month shutdown for each of the existing three nos. 25 TPH boilers, one additional boiler of 35 TPH FBC was essentially required to be installed to avoid reduction in production. It further pleaded the cost of the boiler has been included in the cost of the expansion project of the main plant as steam was required mainly for manufacturing process, while power generation is a side advantage, as the turbine is used for reducing steam pressure and therefore. the cost of boiler is not included in the project cost of the co-generation plant. The petitioner also clarified that the auxiliary power consumption and depreciation normatives have been considered as per the CEA Guidelines which is acceptable by all national and international financial institutions.

8. Once the petitioner complied with the directions given in the Order dt.18.4.98, the proceeding was finally heard on 18.5.98.

8.1 At the hearing, Mr. B.P. Rekhani, who represented the Affected Party, raised only one issue relating to the unit cost of generation of power as projected by the petitioner. But his objection was on a very limited point. While he urged that the unit cost of production of power projected at Rs. 1.66 by the petitioner was wrong and incorrect, he conceded that unit cost from co-generation plant will be cheaper compared to the Gridco's tariff. This is otherwise evident because the Commission's staff has calculated the unit cost of generation of power by the petitioner to be Rs.2.01 having taken into consideration the fixed cost of the project and crediting the second T.G. Set of producing power to a tune of only 2.8 MW instead of 4.3 MW as has been shown by the petitioner in its heat and mass balance diagram. Therefore, in the worst view of the matter, the unit cost of generation will be in the neighborhood of Rs.2/which is far cheaper than the Gridco's tariff.

8.2 Mr. Rekhani has not raised any other objection to the granting of consent as applied for by the petitioner. Even otherwise, there is credible material on record to show that the supply of power from Gridco to the petitioner was neither stable nor reliable. Undoubtedly, it suffered from interruption and variation in voltage and frequency since January, 1995 onwards. Be it further mentioned that there is no denying the fact that the process for tyre manufacturing needs an uninterrupted supply of power as any failure of the power will not only result huge loss by way of scrap, but may also damage the manufacturing equipments.

9. Thus, in the final analysis, as there is virtually no serious challenge to the application of the petitioner from the side of the Affected Party and also taking into consideration the pleadings of the parties, the submissions made at the time of hearing and the feasibility of the project with a Co-generation CPP unit in shape of a 6.25 M W T.G. Set, the Commission is of the opinion that consent should be given to the petitioner to set up a T.G. Set as has been applied for on 3.3.97 subject to the certain terms & conditions. Hence ordered :

That the petitioner is allowed to set up a Co-generation Captive Power Plant of 6.25 M W (T.G. Set) on stand-alone mode of operation and is given consent therefor u/s 44 of the Act, 1948 read with Sec. 21(3) of the Act, 1995 on the following terms & conditions.