IOC to drop Merchant Power plans…

On lines of Global Power Companies, various Indian companies are also loosing interest in the Indian Power Sector. The latest victim of this is the state-owned Indian Oil Corporation Limited (IOCL) which has dropped its plants to enter into the merchant power plant business. Merchant power is electricity that’s sold not to pre-identified customers under long-term agreements, but as a commodity at market price.

As part of its diversification drive, India’s largest refiner, which has a captive demand of 1,200 megawatts, wanted to enter the power business and use the pet coke from its refineries as fuel. Pet coke is a residue left after the refining of crude with a high calorific value and high in sulphur.Instead, it now plans to use the fuel for its chemical business.
The decline in merchant power prices has added to the growing woes of the Indian power sector. According to the India Energy Exchange (IEX), the monthly average merchant power tariffs are currently at around Rs3 per unit from a high of Rs10.78 per unit in April 2009.
According to the MD & CEO of IEX, “While there is competition on the supply side, there are no buyers competing to buy the power. This has led to power producers losing charm in the sector. The same might be the case with Indian Oil.”
State electricity boards (SEBs) across India are saddled with losses because of power theft, technical losses during transmission and distribution, and billing inefficiencies, and having failed to revise tariffs for many years, adding to the losses. The political compulsion of providing free power to farmers has also had an impact on SEBs.
The poor financial health is also on account of non-payment of subsidy amounts by state governments. The cumulative losses of the distribution utilities are around Rs75,000 crore, and if the present trend continues, projected losses in 2014-15 will be Rs1.16 trillion, according to a study conducted by energy consulting firm Mercados EMI Asia for the 13th Finance Commission.