BackPlan to revive Dabhol plant in the pipeline
The plan involves using some of the money in the National Electricity Fund to run the project for three months to see if it is viable
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New Delhi: A plan is being worked upon to revive the 1,967 megawatt (MW) Dabhol Power Plant, operated by Ratnagiri Gas and Power Pvt. Ltd (RGPPL), in anticipation of faster growth in the Indian economy and the consequent demand for power.
The plan, according to three people familiar with the matter who asked not to be identified, involves using some of the money in the National Electricity Fund (NEF) to run the project for three months to see if it is viable.
The power produced will be supplied to Telangana, Andhra Pradesh and Kerala.
The plan has the support of the investors—state-run NTPC Ltd, GAIL (India) Ltd, IDBI Bank Ltd, State Bank of India (SBI), ICICI Bank Ltd and Canara Bank, said one of the three.
This person added that electricity would be supplied at ₹ 5.5 per unit and that GAIL would supply gas to the company at $10 per million metric British thermal units (mmBtu).
An NTPC spokesperson in an emailed response said: “The current status of the revival of the RGGPL is to run the project on a trial basis for three months, supplying electricity @ ₹ 5.50 per unit with GAIL supplying gas at $10 per mmBtu. The proposal has support of the investors— NTPC Ltd, GAIL (India) Ltd, IDBI Bank, SBI (State Bank of India), ICICI Bank and Canara Bank."
The spokesperson added that Maharashtra chief minister Devendra Fadnavis has called a meeting of all the stakeholders on 12 February to discuss the issue.
Queries emailed to the spokespersons of India’s power ministry, GAIL, SBI and ICICI Bank remained unanswered till press time. Officials at Canara Bank could not be contacted, and M.S. Raghavan, chairman and managing director, IDBI Bank, didn’t respond to a message sent to his cellphone.
The lenders want to revive the project and ensure it doesn’t become a bad loan on their books, said the second person.
NTPC and GAIL own 28.91% each in the cash-strapped utility, the Maharashtra government has a 15.33% stake, and the rest is owned by banks and financial institutions including IDBI Bank, SBI, ICICI Bank and Canara Bank.
NTPC had earlier warned its parent, the power ministry, that its investment in Ratnagiri might have to be written off—a significant loss of money and face.
The second person added that while the Maharashtra government is not keen to buy power from the company, “Telangana, Andhra Pradesh and Kerala are ready to buy electricity at" ₹ 5.5 a unit.
Dabhol Power Co., was conceived in the 1990s and originally promoted by the now-bankrupt US energy firm Enron Corp. The asset was transferred to the government in mid-2005, and the project was fully commissioned on 31 March 2010.
The company ran into trouble soon after it was conceived with a new government in Maharashtra scrapping a power purchase agreement a previous government had signed with Dabhol. Since then the company has lurched from one crisis to another. Its name was changed to Ratnagiri Power in 2005.
The original beneficiary of the beleaguered project—Maharashtra State Electricity Distribution Co. Ltd—has refused to buy electricity from the project to help in the debt servicing and meet the expenditure towards operations and maintenance of the project.
The Indian power sector is headed for better times “on the back of improving fuel supply and financial health of state power utilities (SPUs)", India Ratings and Research, the domestic arm of Fitch Ratings, said in a 29 January report. It added that companies would “continue to manage fuel and SPU risks due to a favourable tariff mechanism, their comfortable liquidity and support from the central and state governments".
The revival plan involved sipping into the NEF that was announced in Union budget 2008-09 to subsidize the interest on loans taken by the state electricity boards to cut distribution losses.
“NTPC contributes around ₹ 1,600 crore annually to the NEF. There is a proposal to use ₹ 150 crore from this contribution to keep as a buffer for deficit financing. This may allow some kind of subsidy to the buyer. With the gas price going down and the economy picking up, the project can become viable," said the third person.
Ratnagiri has been dipping into its insurance reserves to service its debtors to avoid being classified as a non-performing asset. Fuel supply to the plant is an issue due to lower production of gas at Reliance Industries Ltd’s D6 block in the Krishna-Godavari basin. Power plants have been operating below production capacity because of the unavailability of fuel. India has a power generation capacity of 2,55,681MW, of which 22,971.25MW is fuelled by gas.
The Dabhol plant requires 9.7 million standard cu. m per day (mscmd) of gas, but has been allocated 8.5 mscmd. Over the past decade, several plans were drawn up to revive the project, including leasing out the terminal to earn user charges, but most were abandoned. Ratnagiri also claims that Maharashtra State Electricity Distribution Co. owes it ₹ 1,112 crore in electricity dues; the latter denies this.
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