NEW DELHI, Aug 12: The petroleum ministry has agreed to give a 25 per cent rebate in commitment charges payable by independent power producers (IPPs) to national oil companies. However, this rebate will be applicable only for IPPs, who use fuel oil for their power plants and have plants situated at ports.

Significantly, on the issue of liquidated damages (LDs), the power and petroleum ministries have worked out a formula according to which the oil companies will pay the damages equal to interest plus depreciation plus 50 per cent of operating and maintenance (O&M) charges subject to independent power producers paying the prescribed premium.

The oil companies had earlier proposed to pay liquidated damages equal to the cost of alternative procurement subject to 5 per cent of last invoice value. This new formula is in line with the demands of financial institutions and independent power producers.

The oil companies have also agreed to accept the commitment charges in instalments from independent power producers viz 50 per cent within seven days from the date of financial closure and 50 per cent within the next six months.

On the pricing issue, it has been decided that the total cost of the imported liquid fuel will be a sum of the landed cost plus demurrage plus foreign exchange handling charge (1 per cent of CIF) plus sourcing fee (2.5 per cent of CIF) plus service charges.

Petroleum ministry additional secretary Devi Dayal told The Financial Express that a notification on the revisions will be issued soon. According to Dayal, all independent power producers who have their plants situated at ports will get 25 per cent reduction in commitment charges irrespective of the fuel they use for their power plants.

Figures worked out by the petroleum ministry show that as against the earlier payment of Rs 16 lakh per mega watt of power generated, independent power producers using fuel oil and those having plants located at ports will now have to pay only Rs 12 lakh per mega watt as commitment charges to the national oil companies.

This payment has been further reduced to Rs 9 lakh for independent power producers who use fuel oil for their power plants located at ports.However, the producers using fuel oil for their plants which are situated far from the ports will pay Rs 12lakh.

The ministry has also clarified that liquidated damages will be payable by oil companies only if they fail to supply 85 per cent of the linkage quantity to generate power which is at the rate of 68.49 per cent plant load factor as indicated by the power ministry.

In case of the independent power producers' failure to uplift minimum 85 per cent of the linkage quantity, they will have to pay the loss in margin and the inventory carrying cost to the oil companies.

For these liquidated damages, oil companies will charge a premium of 8 per cent of the fuel cost. However, oil companies will have back to back guarantee with the railways and port trusts and will pay premium to them out of their own premium of 8 per cent. On the earlier apprehensions raised by the independent producers on the quality of naphtha to be supplied, the petroleum ministry has decided to appoint a committee which will submit a quality report on import of naphtha.

Meanwhile, the oil companies have agreed to guarantee naphtha with a calorific value of 10,200 Kcal/kg.

Oil companies have also agreed to take the responsibility of supplying agreed quantities through tank wagons up to the site of the independent power producers plant.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.