Added costs

WITH the Karnataka Legislative Assembly session having been adjourned sine die on January 31 after seven days, issues relating to the power sector which were to have been raised by the Opposition in the House remained to be discussed. A day before the start of the session, A. Ramdas, the Chairman of the Public Accounts Committee of the State legislature, had in an open letter to Chief Minister S.M. Krishna raised the matter of the escrow account of Tanir Bavi Power Company Pvt Ltd, and asked for another look at the power purchase agreement (PPA) signed by independent power producers in general and Tanir Bavi in particular.

Following the publication by Frontline of a report on the situation created by the high costs of power purchased from the Tanir Bavi company (January 4,2002), a competent and senior officer of the Karnataka Power Transmission Corporation Limited (KPTCL) was transferred. Frontline has learnt from informed sources in the energy sector that the officer concerned was held accountable for the "leak of privileged information" to Frontline. The story was actually based on information drawn from a range of sources, including from the company, and much of the information was drawn from documents such as the PPA, which are in any case in the public domain.

The high costs of power purchase from Tanir Bavi, and its negative implications for privatised distribution, have been noted in the Privatisation Strategy Paper prepared by the CMS Cameron McKenna-led consortium. The Tanir Bavi project will have a "significant impact" on the privatisation of any part of KPTCL, the report notes. The PPA and the escrow and Disbursement Agreement provides for 35 divisions within the State to be dedicated to paying Tanir Bavi's dues. This amounted, in 2000, the first year of the project period, to Rs.930 crores, or 28 per cent of the proceeds from KPTCL's electricity sales. The Strategy Paper notes that the power purchase cost from the 220 MW Tanir Bavi power plant is "disproportionately high". While the company contributes to just 3 per cent of KPTCL's overall capacity requirement, it accounts for 22 per cent of KPTCL's total power purchase cost.