Narendra Modi-led Gujarat government has banned state-based companies from sourcing electricity from other states, a move that will compel them to buy costlier power from government-run utilities.
The decision, ahead of the general elections beginning next month, will affect companies across industries such as Reliance Industries, Nirma, Larsen & Toubro, Hindalco, Apollo Tyres, Sun Pharma, Petronet LNG, Gujarat Florochemicals, United Phosphorus and Alembic.
Companies say their costs will rise by at least Rs 2.75 a unit of electricity, as they will have to pay close to Rs 7 for a unit of electricity supplied by state-run utilities, against Rs 4.25 they were paying earlier.
Gujarat-based industries import close to 1,000-Mw power from other states through trade on electricity exchanges, while state-run utilities have almost 2,500-Mw of idle generation capacity.
The decision has come as a surprise for the industry as Modi, who is the Bharatiya Janata Party’s nominee for prime ministership, has been selling Gujarat’s supposedly industry-friendly environment in his poll campaign.
The government has, however, defended its decision, saying it will help the power surplus state save thousands of crore of rupees every year
“Gujarat has to pay close to Rs 8,000 crore annually as fixed or capacity charges to power producers since it is unable to buy as much power as it contracted,” said an industry expert closely working with the state’s energy department. “Gujarat government disallowed power imports to find market for the excessive electricity generation capacity.”
He said Gujarat also wants to reduce its solar power tariff, since it tied up for about 950-Mw capacity at a higher price, without inviting competitive bids as against the need for 350 Mw to meet its obligations to promote renewable energy.
While most of the industrial units will be compelled to purchase electricity from the state utilities, some are considering using their idle captive power production units.
Gujarat Energy Transmission Corporation or GETCO, the state’s power transmission company, stopped industrial houses from accessing grid network within 48 hours of the government directive. The company said the state does not have adequate transmission capacity to import power, especially in summers when demand soars.
“Due to rise in the system load demand, leading to grid constraint in the upstream network, it shall not be feasible to permit short-term open access to consumers as per enclosed list with effect from March 20,” GETCO said in a letter to over 125 industrial units on Tuesday. “However, distribution company will cater your contract demand from the generation at their disposal.”
An office bearer of a south Gujarat-based industrial association said: “Immediately, demand for power on electricity exchanges went down by at least a million units and it is expected to fall further, while our energy costs will go up by 25%.”
A majority of the industrial units in Gujarat manufacture energy intensive chemicals, petrochemicals, glass, ceramic and pharma products. “We cannot compete in international market with higher energy costs,” the industry association representative said, adding that industrialists will make a presentation to the government in a couple of days.