Industry jittery over moves to hike power tariff

By Our Special Correspondent

KOCHI, JUNE 30. The proposal of the Government to increase the power tariff has send jitters down many an industry in the region which is affected by a host of problems already.

Major power guzzlers such as the Indian Aluminium, Binani Zinc Ltd., Carborandum Universal and public sector units like Travancore Cochin Chemicals Ltd., are going through a bad patch because of raw material problems as well as woes on the marketing front.

According to the spokesperson of the Kerala High Tension and Extra High Tension Industrial Electricity Consumers Association, though the Industries Minister, Mr. P.K. Kunhalikutty, had promised that any "drastic decision" on power tariff hike would be taken only after holding discussions with the representatives of the industry, the Association is not convinced that things would shape up the way they want.

One of the worst hit would be Binani Zinc which is already grappling with the problem of low price for zinc which has hit an "all time low" according to sources. In the London Metal Exchange, zinc is quoted a price of $895 as against $1,120 per tonne last year. The negative impact of this on the company's net realisation is around 15 to 20 per cent and the company is in for bad times, sources say.

Zinc being in the open general licence, the company is forced to link to the London Metal Exchange price of zinc and the additional burden cannot be passed on to the consumers. The Union Government has already announced its policy of steadily decreasing the import duty on zinc in another three years to around 20 per cent or less from the present tariff barrier of 35 per cent and this would further make the company's operations vulnerable.

The company is dependent totally on the imported concentrate which forms over 50 per cent of its cost of production. Therefore, the steady erosion in the value of rupee vis-a-vis the dollar also has an adverse impact on its profitability. In view of this, even a 10 per cent increase in the power tariff, at this juncture, will totally cripple this industry which has been functioning in the State over the last 36 years, sources point out.

The industry in the State had been requesting the Government from time to time for allocation of viable mini-hydel projects in line with norms and guidelines prevalent in other States for partly meeting the energy requirements. Depending solely on the higher cost of grid power, had created the present problems, the industries feel. However, the Government had not shown any enthusiasm for such proposals. For long-term survival of power intensive industries, this was the only viable alternative.

The Planning Board even as early as 1991 had suggested a number of measures to streamline the energy scenario in Kerala but there had been few takers with the Government turning a deaf ear. In the energy sector, the board had suggested that a "multi-pronged approach is called for. The sanctioned hydel projects have to be completed on a warfooting by the KSEB. Thermal units have to come to the State at the earliest. The question of setting up joint plants in other States should be explored vigorously. The scope for tapping the potential from numerous mini, micro and small hydel stations should be explored through encouragement of private initiative. Captive power plants by industrial units in the private sector would have to be encouraged".

Around 25 small, mini and micro hydel projects were identified to be set up in the private sector years back. "Although we have been hearing about several projects (hydel) on the anvil, nothing concrete is being done to bring them into reality for the last so many years," a senior executive of Carborundum Universal Limited, a prospective promoter of a small hydel project, said. Now there are plans to hike the power tariff by 40 to 60 per cent. This would make all the industrial units, majority of whom are power intensive, unviable, industrialists said. "Even a 10 per cent hike would reverse the performance of public sector Travancore Cochin Chemicals Limited (TCC), which is now on the path to recovery," Mr. M.P. Sukumaran Nair, Managing Director of the company, said.

The extra high tension industrial electricity consumers want the Government to take steps to tone up the functioning of the Kerala State Electricity Board and also improve its internal efficiency and to initiate cost cutting measures in its operations. The formation of a State Electricity Regulatory Commission is also demanded by it. As an interim measure, any hike in power tariff should be linked to the wholesale price index. An immediate policy guideline may be drawn up for allocation of hydel power projects for captive use of industries in the State.

According to Mr. N. Mohan, president of the Binani Industries, in an industrial scenario which is getting aligned rapidly with the global market, the pricing policy of the company for industrial power cannot be seen in isolation. Any sudden steep increase would have a snowballing effect on the overall economy of the State as many industries would be compelled to cease its operations as it would lose its viability, he pointed out.

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