Captive power is captivating for corporates

Companies are increasingly looking to set up their own capacities

Almost 15 years ago, three large companies in Gujarat decided to produce the electricity they needed for their regular operations. All the three belong to the chemical process industry where power is not only a critical factor, but uninterrupted-quality-power becomes the determining factor between losses and profits — consequently, extinction and survival.

They knew that the power situation was unlikely to improve soon. The writing on the wall was clear even 15 years ago. The state was incapable of generating enough power. Moreover, politics and opportunism would inevitably encourage (i) promises of free power, and (ii) power theft and uncollected bills, both of which would adversely affect the quality of power supplied to the organised industry. So, together they set up Gujarat Industrial Power Company Ltd (GIPCL).

True, cement and some large textile plants too had embarked on captive power generation in the past, but these were totally captive. This was the first attempt at producing power through an ‘industry-consortium’. Today, GIPCL remains one of the most efficient producers of thermal power in the country and is extremely profitable.

Naturally enough, captive power production has found many votaries: This can be gleaned from the fact that a substantial power generation capacity has come up by way of captive generation capacity in the country (see table: Captive power by industry).

Companies set up captive power generation capacities not because they love it. They do so because they are left with no other choice.

First comes the cost of power generation (see table: Cheaper, better power). There is a point when the high cost of power makes industries uncompetitive both in domestic and international markets.

Quality of power comes next. After all, no industry would like to operate in a situation where the quality of power - uninterrupted and without fluctuations - is not certain.

Third, is the ability to plan future production schedules and even take up export orders where the customer is not interested in appreciating the helplessness of a manufacturer in the face of power shortages.

That could explain why several companies like Sree Metallics, Tata Sponge, Shrishti Ispat, Bhaskar Steel, Madras Cement, Shree Cement, Laxmi Cement, JK Cement, Lafarge India, Arvind Mills, Welspun, Maral Overseas, Kanotia Chemicals, Indian Rayon, DCW and Chemplast have all begun looking at captive power production.

Obviously, if power tariffs continue to soar, it is only a matter of time before an entrepreneur decides to create a cooperative of common citizens and generate power for them. It would appear to be the only way out of exorbitant power tariffs on the one hand, and poor quality power supply on the other.

Will this actually happen? Time will tell.