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May 25, 2001
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Money > Business Headlines > Report May 25, 2001 |
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Lower DPC tariffs: High oil prices may affect talksS Ravindran & Arijit De The spurt in global oil prices, and the consequent impact on naphtha, will curtail Dabhol Power Company's ability to offer concessions on its tariff structure, even as the government looks to isolate fuel costs from the tariffs. The Madhav Godbole committee is currently renegotiating a lower tariff structure for power from the 2,184 mw Dabhol power project. Top government sources said they were working around the uncertainties in the naphtha prices. "We are working towards a rational tariff structure which will insulate it, to some extent, from the vagaries of fuel prices," a top state government source said. The official indicated that this could take the form of reducing the pass-through component of fuel prices. "We could try to get a lower pass-through, from the current 100 per cent," he explained. Alternatively, the fuel component could be capped at a certain level to protect the tariff from surging fuel prices. Fuel prices are an important component in the tariff structure, as the entire component (in variable costs) is passed on to the purchaser. Crude oil prices, which had touched a high of $33 per barrel last year, pushing up DPC's tariff, had softened to $26 per barrel levels in December 2000. However, prices have jumped over 20 per cent in the last few weeks to around the $30 levels again. Power industry sources indicate this may cast a shadow over the conciliation talks. While the 740-mw phase-I of the project is currently naphtha-based, the entire plant is supposed to turn to LNG once the 1,444-mw phase-II comes into commercial operation. Naphtha and LNG prices are both linked to crude oil prices. DPC had earlier attributed the rise in tariff from the contracted price partly to the sharp rise in global naphtha prices. It had argued that the rise in naphtha prices coupled with the low offtake of power by the MSEB was responsible for the higher tariffs. Sources added that "containing the fuel cost charges will reduce tariffs and make the project conducive to higher offtake of power." Powered by YOU MAY ALSO WANT TO READ:
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