Wired to expansion

Calcutta, Oct. 23: The National Thermal Power Corporation (NTPC), which has bid successfully for setting up a 300-mw power plant in Sri Lanka, has initiated negotiations with the government of the neighbouring country on the project.

“We have emerged as the successful bidder in the limited competitive bidding process. Details of the project are being worked out. We are now working on the issue of fuel ? the most important input for running a power plant,” senior NTPC officials said.

The officials feel the project can help Sri Lanka put its ailing power sector back on its feet. Sri Lanka desperately needs to increase its generating capacity and bring down the cost of production, without inviting opposition from the powerful environment lobby.

“The proposed NTPC project at Norochcholai in Puttalam district, north of Colombo, could be the forerunner of coal-based power plants which would help bring down the cost of production and reduce power tariffs in a country where rates are the highest in the region,” the officials added.

Sri Lanka has been predominantly using oil to fuel its power plants because of environmental considerations. Sixty five per cent of the power is generated by oil-run plants.

However, oil is an expensive commodity and its price fluctuates in a wide range. That, to a large extent, explains why oil is used to generate only 7 per cent of the power globally.

The issues being discussed are the choice between low sulphur coal and liquefied natural gas (LNG) for the fuel; the price of power; the feasibility of the project and its environmental impact.

Feasibility and environmental studies had been conducted earlier, and these reports are currently with NTPC for its consideration. Apparently, the environmental issue is not a major one now.

The fuel choice is a toss-up between coal and LNG. However, the chances of choosing coal over LNG are bright, sources said. NTPC is keen to use LNG as the fuel.

Hydel power is in use in Sri Lanka, but water is getting scarcer by the year in the island. The government recognises that the country has all but exhausted its hydel-generating potential. Therefore, coal is the only viable alternative left.

NTPC is also planning to set up a gas-based combined cycle power plant in Bangladesh through a joint venture with Bangladesh Power Development Board and Petro Bangla.

The power sector environment in Sri Lanka is rather worrying. The state-run Ceylon Electricity Board (CEB), which handles 80 per cent of generation, 100 per cent of transmission and 88 per cent of the distribution, is heavily in debt to the treasury. The accumulated debt is $811 million.

In 2004, the CEB spent SL Rs 40 billion on oil-based power generation, while its total annual turnover was only SL Rs 50 billion.

To make up shortfalls in production, the CEB has been buying power from independent producers. By 2004, it had spent SL Rs 26 billion only on this account.

There are transmission losses, distribution flaws and faltering recoveries. There is also a reluctance to charge economic price due to social and political reasons.