February 18: The Chief Minister of West bengal, Jyoti Basu, today opposed the reported move by Steel Authiority of India (SAIL) to virtually sell off its captive power plants at Durgapur, Rourkela and Bokaro to controversial Enron International. The trade unuions of SAIL have also vehemently opposed Enron's back door entry into the power surplus state.``I would take up this (Enron's) matter with the Centre. Trade unions, including CITU, came to me with a request against the move since such plant has been running at a loss. Even Enron represenrative once met me but there was no discussion on transfer of captive power plants,'' Basu said, speaking at the second day's open session of the state coordination committee here.Basu said he had assured the DSP trade unions of taking up the issue with the concerned ministry and with the Prime Minister at the Centre. ``If the Enron takes over the captive power plant, power tariff will go up substantially,'' he said.Meanwhile, trade unions CITU, INTUC, AITUC andthe Officers' Association of Steel Authority of India Ltd (SAIL) said that they are fearing the decision of the SAIL management to transfer the power units to Enron which would aid US power multinational's entry into the power-surplus eastern region.They argued this "suicidal" decision would make SAIL steel dearer and uncompetitive and would lead to the closure of the power-intensive alloy steels plant at Durgapur. West Bengal Chief Minister, Jyoti Basu has agreed to write to Prime Minister Atal Behari Vajpayee against this decision, said the union leaders.The Union's concerns were expressed at a press conference among others by representatives of the three unions and officers' associations as well as a state minister Mrinal Banerjee and two members of parliament, Gurudas Dasgupta and Sunil Khan.They pointed out that currently DSP pays out Rs 2.40 per unit of power to Damodar Valley Corp against the cost of a mere 90 paisa per unit for 740 million units of captive power generated annually. If Enronsells at DVC's rate, DSP will have to shell out additional Rs 110 crore per year, and at Enron's benchmark cost of Rs 3.50 per unit, extra cost will be Rs 220 crore per year.By handing over effective control on generation and distribution to Enron, DSP can hope to gross a maximum of Rs 80 crore as one-time payment. "If we calculate 18 per cent interest on Rs 80 crore, it will be able to save, at best, Rs 14 crore annually. Thus for an annual gain of Rs 14 crore, DSP will be saddled with an additional burden of Rs 220 crore a year," they said.Pointing out that Enron has proposed to reduce the workforce in all captive power plants to 350 only, the union leaders said that this would force 650 workers out of their jobs.Earlier, SAIL said that it is trying to select partners for its captive power plants by March this year. "SAIL is attempting to complete the process of selection during this fiscal. the exercise will fetch Rs 350 crore to SAIL," officials said.SAIL owns and operates captive powerplants in its integrated steel plants at Durgapur in West Bengal, Rourkela in Orissa and Bokaro in Bihar having an aggregate capacity of 542 mw. The steelmaker reported a loss of Rs 890 crore for the nine months to December 31, 1998, hence it is under pressure to get out of non-core businesses.The company intends to transfer these power plants to a subsidiary power company and has offered 49 per cent of its equity and operating control in the proposed subsidiary to a strategic partner. The debt to equity ratio of the subsidiary has been envisaged as 2:1.After the completion of the technical bids, four foreign and Indian companies have been shortlisted. They are Enron of the US, Bombay Suburban Electric Supply Co of India, National Power Co of UK and Consolidated Electric Power of USA. "The final selection will be after the financial bids are opened and evaluated," the official said.He said the power plants would continue to be captive units and sell their entire output to the relevant steel plantsunder a long-term contract.The consent of the concerned regulatory bodies - Orissa Electricity Regulatory Commission and Damodar Valley Corp - has already been obtained for this structure."Due to captive status, provision of export to external customers does not exist. Thus apprehension pertaining to operational priorities being compromised due to external influence is invalid. Even the operating mode of the captive power plant, after transfer to a subsidiary power company, will remain unaltered including provision of islanding during grid abnormalities," he said.The internal cost of generation of SAIL power plants is rather low due to low capital cost on account of depreciation and high capacity use. The restructuring cost has been so designed that the effective cost to SAIL for electricity supplied by the subsidiary company is very close to the current level of internal cost. These costs are significantly lower than current utility tariff, the official said.This would be possible on account ofupfront realisation for SAIL due to transaction and dividend payment to SAIL as shareholder. According to a preliminary financial analysis for a 15-year power purchase agreement, SAIL will remain cash positive regarding the power plant operation under a subsidiary company, he pointed out.The official said the transfer of the captive power plants to a new subsidiary with equity from a strategic alliance partner would have two benefits. Apart from mobilising the initial cash receipt amount (total debt plus strategic alliance partner's equity) from subsidiary power company, SAIL would also be relieved of the burden of arranging renovation and modernisation expenditure."So, along with financial relief, it will create an opportunity for improved operational efficiency, upgradation of technology and future expansion in power generation," he said.With marginal investment, the capacity of each of the units can also be increased to 66mw from 60mw now. The addition will yield higher cost effectiveness ofoperations and thereby contain the cost of electric power, he added.
