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Power shortage cuts profits for Tamil Nadu textile exporters

Power shortage cuts profits for Tamil Nadu textile exporters
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First Published: Tue, Dec 11 2007. 10 50 PM IST

Updated: Tue, Dec 11 2007. 10 50 PM IST
Chennai: Textile units in Tamil Nadu are being hit hard by an acute power crunch in the state. This has meant that they have had to execute export orders using their backup captive power generation units. The catch is that the power so generated is at least twice as expensive as the electricity supplied by the state utility.
Profit margins for Tamil Nadu’s textile exporters, mainly based in the cotton knitwear hub of Tirupur, are already under pressure because of the appreciation of the rupee against the US dollar. The Indian currency has risen about 13% against the dollar.
Net margins in apparel exports range between 5% and 8%, according to the Apparel Export Promotion Council.
And the industry is also caught in the middle of a blame game between wind power producers and the state government.
“We can’t stop production when there is no power, as this would make employees idle and contribute to a much bigger loss,” says R. Sivaram, executive director of Royal Classic Mills Pvt. Ltd. This means that companies are forced to use power from captive generation units, which costs at least Rs9 per unit against the Rs4.50 per unit charged by the Tamil Nadu Electricity Board.
The state has an installed generating capacity of 10,098MW against a peak power demand of 8,800MW. However, the actual available power is only 7,500MW.
The state government has now resorted to power cuts for at least four hours a day. It has attributed shortfall from wind energy sources, estimated at 1,500MW, and another 1,000MW not being given from the central pool as reasons for the power shortage.
State electricity minister Arcot N. Veerasamy says power demand increased by 4,000MW in the last decade, while capacity addition was only 531MW.
New industries create an additional demand of more than 600-700MW per annum, according to Confederation of Indian Industry.
The Southern India Mills Association says the textile industry has incurred losses of Rs1,000 crore per annum due to underutilization of capacity because of shutdowns due to the lack of power.
The industry average for power cost is between 8% and 9% of sales. With companies forced to use costly captive generation for one-sixth of the time, the power cost component will go up by 1-4 percentage points, said P. Nataraj, managing director of KPR Mill Ltd, a textile firm with a turnover of Rs572 crore.
Wind energy producers say the situation could have been averted if the government had installed proper infrastructure to take and transmit all the power generated by the windmills in the state, which has a total wind power generation capacity of 3,686MW.
K. Kasthurirangaian, vice-chairman of Indian Wind Power Association, an industry body, said 80% of wind power generation happens between May and October, which is when south-west winds prevail. “This is how the nature works. Blaming us (wind energy producers) for power shortfall is unfair,” he said.
He said between 800MW and 1,000MW of wind power was lost during the peak season as the state utility has not installed adequate transmission lines to evacuate the power produced. “We could have supplied this excess power to other states in summer and get from them at this time,” he said.
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First Published: Tue, Dec 11 2007. 10 50 PM IST