INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

MAHARASHTRA TO POWER AHEAD WITH TWO SEZS

AFTER having bagged the most number of special economic zones (SEZs), Maharashtra is set to break new ground. It has received in-principle approval from the ministry of commerce for two power SEZs.

The state's industry development agency, MIDC, is looking at setting up a 1,000 mw power plant at Chandrapur and a 250 mw plant at Raigad. Both will be SEZs, although details about the economic plans will take another six months to work out. These SEZs are in addition to the two gas-based power plants of MIDC which will be run by Reliance. The power plants are based at Navi Mumbai and Butibori.

The idea of a power SEZ has emanated from the need for units located in an SEZ to be cost competitive. Since power is a significant part of input costs for all sectors, from IT to manufacturing, the power SEZs will help keep power costs down. Being SEZs, the power plants will be able to import everything, including fuel, without having to pay Customs or excise duties, which, in turn, will keep generation costs down, benefitting the consumer. “We have received in-principle approval from the ministry of commerce for two power SEZs, a 1,000 mw plant at Chandrapur and a 250 mw plant at Raigad,” MIDC CEO Rajiv Jalota confirmed. He added that MIDC would not run the power plants without committing on the manner it was proposed to run them. The MIDC will appoint consultants who are expected to submit their report on the detailed economic plans for the SEZs by January 2007.

In addition to working out an economic plan for the power SEZs, the consultants will also have to address the complex issue of what to charge for the power which could be supplied to non-SEZ or export-oriented units (EOUs).

It is also expected that the consultants will address the issue of whether to run the power SEZs on a build-operate-transfer (BOT) or any other basis. While Jalota declined to speculate on the manner on which the plants could be run, including on a BOT basis, he admitted that imported coal might be a viable fuel for the plants.

MIDC already holds 240 acres in Raigad and will need to acquire another 10 acres for the proposed 250 mw power plant. Jalota said they have enough land at Chandrapur for the 1,000 mw plant. “The usual ratio is one acre of land for 1 mw of power,” he stated, adding that investments are usually calculated at Rs 3-4 crore per mw. Observers maintain that the fuel will decide the investments required.