1. Discussion on Terms & Conditions of Power TariffGenerator Perspective By The Tata Power Company Limited Jamshedpur Division 12/11/2003

2. Operating Parameters Coal Based Thermal Power Stations

3. Unit Size • Operating parameters should be linked to • Unit size - • Up to 70 MW • Between 70 to 150 MW • Between 150 to 300 MW • Above 300 MW

4. Operating Range • Operating parameters should be linked to • Operating range - • Below 70 % PLF • Between 70 % to 80% PLF • Above 80 % PLF

5. Heat Rate • Between 70 % to 80% PLF • Unit size up to 70 MW - 2650 kcal / kwh • Unit size between 70 MW to 150 MW - 2550 kcal / kwh • Unit size between 150 MW to 300 MW - 2500 kcal / kwh • Above 300 MW - 2450 kcal / kwh • At PLF below 70 %, the value of Heat Rate should be • increased by 50 kcal / kwh • For PLF above 80 % it should be lowered by 50 kcal / kwh

6. Auxiliary Power Consumption • Between 70% to 80% PLF • Unit size Cooling Towers Without CT • Upto 70 MW 11.0% 10.5% • 70 MW to 150 MW 10.5% 10.0% • 150 MW to 300 MW 9.5% 9.0% • Above 300 MW (TDBFP) 8.0% 7.5% • Above 300 MW (EDBFP) 9.5% 9.0% • At PLF below 70 % the value of Auxiliary Power • Consumption should be increased by 0.25 % • For PLF above 80 % it should be lowered by 0.25%

7. Tariff • Fixed Charges • Return on total capital employed - 18.7% (Fixed for 5 years slab) • Depreciation - 3.60 % (plus AAD, if applicable) • 100 % Fixed charges payable at 80 % Availability • Variable (Fuel) Charges • Primary Fuel : Based on Operating parameters • Secondary Fuel : Existing norm of 3 ml / kwh to continue

8. Incentives • The present norm of 21.5 paisa / kwh as incentive is very • reasonable. However - • For a Base Load Station incentive should be payable at PLF • above 85 %. • For a Peak Load Station having spinning reserve incentive • should be payable at PLF above 75 %.

9. Return on Capital • Fix for 5 years • Norms of Debt & Equity ration should be 70 : 30 • Return on equity 16 %. • Interest on loans 2 % above Prime Landing Rate (9%). • Ideally Income Tax should be on ROE. The present rate is • 35% + 5% surcharge. • Interest on Working Capital etc. 0.50 % of total capital. • Operating expenses 3% of the capital employed with simple • escalation of 6 % per year, hence average for 5 years is 3.9% • of total capital deployed.

10. Hence • Return on Capital = (16 % of 30 % + 11 % of 70 % + 36.75% of 16% of 30% + 0.50% of 100 % + 3.9% of 100 % ) of 100 % Capital • = 18.7 % of 100 % Capital

11. Depreciation • The present methodology of 3.6% depreciation with “Advance Against Depreciation” is very logical. • The sum total of depreciation and advance against depreciation should not be limited to 1/12th of the loan amount • It should be limited to 1/10th of the loan amount • Hence • Depreciation = 3.60% (plus AAD)

12. Secondary Fuel • In most of the cases the secondary fuel is petroleum products. By having normative values, there will be tendency by generator to save on the same. • The existing norm of 3 ml / kwh should be retained

13. Thank You