Dabhol LNG terminal could be up for grabs

Dabhol LNG terminal could be up for grabs

New Delhi: In a significant departure from its earlier stand of not inviting private sector participation, the Indian government is considering a proposal which, if approved, would call for bids for liquefied natural gas (LNG) terminal associated with the controversial Ratnagiri Gas and Power Project Ltd, formerly known as Dabhol Power Co.

The proposal, one of several options, has been forwarded to the empowered group of ministers (eGoM) on Dabhol project by a committee of secretaries (CoS), a group of senior bureaucrats, after a 30 September meeting chaired by the cabinet secretary.

If approved, the bids could set off yet another battle between Reliance Power Ltd and Reliance Industries Ltd, controlled respectively by estranged brothers Anil Ambani and Mukesh Ambani, who have previously expressed their interest in the terminal. However, spokesmen of Reliance-Anil Dhirubhai Ambani Group and RIL didn’t respond to emailed questions.

On 12 March, power minister Sushil Kumar Shinde had told Mint that the government would “not allow any private sector participation in the project". And on Monday, Shinde insisted: “There will be no private sector involvement. Not at all." Shinde is also a member of the ministers committee that had explored the hiving off idea last year but dropped it.

Still, minutes of the secretaries meeting reviewed by Mint say: “It was decided that the option of hiving off the terminal, without construction of breakwater on ‘as is where is’ basis would be clubbed with that of leasing it out on a long term, example 15-20 years basis. In this option of sale/lease, NTPC/GAIL would also be eligible to participate."

However, with state-owned NTPC Ltd and GAIL (India) Ltd, the largest shareholders in Ratnagiri, maintaining that if there is a move to sell the terminal, it should be offered to them first, the meeting also decided that “...a right of first refusal could vitiate the bidding process, the eGoM in its next meeting may be requested to take a final decision in this matter".

NTPC and GAIL hold a 28.33% stake each in Ratnagiri. The rest is held by Maharashtra State Electricity Board (15%), and several banks.

This latest development follows the 8 August CoS meeting where power secretary Anil Razdan was asked to rework the financials of Ratnagiri, along with financial services secretary Arun Ramanathan, and explore this option.

The LNG terminal is part of the integrated power project with a capacity of 2,150MW that is being derated to 1,844MW. 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 raised to 5mtpa.

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 risen to Rs2,364 crore and Rs2,413 crore, respectively. “Why should the terminal be bid out? This is an integrated project," insisted a senior NTPC executive who didn’t want to be named. However, a senior GAIL official, also speaking on condition of anonymity, said: “We would be happy to acquire the terminal. The CoS has forwarded the proposal to the eGoM. It is for the eGoM to decide on the future course of action."

“With NTPC and GAIL having a 56.66% stake together in the integrated project, will the new participation be sought for the balance stake in the project or the complete 100% stake? While an Indian private sector company wouldn’t want to be a minority partner in the terminal, a foreign player with a gas source may be fine with it," said Arvind Mahajan of audit and consulting firm KPMG.