New Delhi: The government’s position may have changed on hiving off a key asset of the Ratnagiri Gas and Power Pvt. Ltd, or RGPPL (formerly the Dabhol Power Co.) power plant in Maharashtra in an effort to improve the company’s financial health, but the issue is far from resolved, with two of the firm’s largest shareholders opposing the move.
There is also no clarity on whether private sector firms will be allowed to bid for this asset, a liquified natural gas (LNG) terminal. Both Reliance Power Ltd and Reliance Industries Ltd (RIL), respectively controlled by estranged brothers Anil Ambani and Mukesh Ambani have previously expressed their interest in the terminal.
Spokesmen at the Reliance- Anil Dhirubhai Ambani Group didn’t respond to emailed questions on the group’s interest in the terminal. A spokesperson for RIL declined comment.
Tripping up: A file photo of the erstwhile Dabhol power plant. Photograph: AFP
The government’s earlier stance was that it would not sell the terminal. On 12 March power minister Sushil Kumar Shinde had told Mint that the government would “not allow any private sector participation in the project”.
On 8 August, the committee of secretaries (CoS), a group of senior bureaucrats, decided to consider hiving off the terminal and asked power secretary Anil Razdan to rework the financials of RGPPL, along with financial services secretary Arun Ramanathan, and explore this option. It noted that “the option of hiving off the LNG terminal also needs to be explored as it is likely to be a major financial burden on the finances of the company”.
On Thursday, Shinde said he could not comment on the issue till he saw an official communication from CoS.
NTPC Ltd and GAIL (India) Ltd, the largest shareholders in RGPPL, continued to maintain that if there is a move to sell the terminal, it should be offered to them first.
NTPC and GAIL hold a 28.33% stake each in RGPPL. The balance is held by Maharashtra State Electricity Board (15%), and lender banks IDBI Ltd, State Bank of India, ICICI Bank Ltd and Canara Bank.
“We want the terminal. We will exercise the first right of refusal option and maintain our earlier stand,” R.S. Sharma, chairman and managing director, NTPC, India’s largest power generation utility, said.
A top GAIL executive, who did not wish to be named, echoed that sentiment.
Meanwhile, Razdan said that the government is “yet to decide on the issue of hiving off the LNG terminal”. He added, “Our first and immediate priority is to put the project back to its generation capacity.”
The LNG terminal is part of the integrated power project with a capacity of 2,150MW. The project is fuelled by gas, which is transported typically by ship and always in liquid form. It needs to be converted into a liquid before shipping and reconverted into gas when it arrives at the terminal. The terminal has a capacity of 1.2 million tonnes per annum (mtpa) and this is to be increased to 5mtpa.
RGPPL was originally promoted by Enron in the 1990s. It ran into trouble soon after, with the government—with which Enron signed the agreement—losing in the state assembly elections, and the new government questioning the high cost of power the plant would produce.
Even in its new avatar, the project has been mired in controversy over issues ranging from inadequate gas to faulty equipment as previously reported by Mint.
The project cost was fixed at Rs10,038 crore at the time of the asset transfer to the government in mid-2005 and this included Rs870 crore as completion cost and Rs683 crore as interest charges during construction. The completion cost and interest charges have since grown to Rs2,364 crore and Rs2,413 crore, respectively.
An empowered group of ministers, headed by external affairs minister Pranab Mukherjee, had last year explored the idea of hiving off the LNG terminal. The government later dropped this idea.
Prayesh Jain, an analyst at research firm India Infoline, said, “Since the project is already facing a lot of problems, it will be better if a private player comes in to improve efficiency.”