Fuel shortage clouds Dabhol power plant

It risks becoming an NPA due to stoppage of payments by MSEDCL

Ratnagiri Gas and Power Pvt. Ltd.’s (RGPPL) Dabhol power project, once owned by Enron, is seeing history repeat itself. For the second time in 13 years, the Maharashtra State Electricity Distribution Company (MSEDCL) has refused to buy electricity from the project, saying the price is too high, and stopped all its payments.

The company has a debt of Rs.8,436 crore. Its main stakeholders are Central public sector undertakings. The Maharashtra Government, and several banks also have equity.

“Due to stoppage of payments by the MSEDCL, RGPPL could not meet its interest payment due in September, and risks becoming a non-performing asset by November, unless adequate affordable domestic gas is ensured, and the beneficiaries commence paying corresponding fixed costs,” RGPPL spokesperson said. It has asked the Union Petroleum Ministry and Maharashtra’s Chief Minister Prithviraj Chavan to intervene.

Maharashtra has been purchasing 95 per cent of the power supplied by RGPPL, which began operating in 2005. The problem arose in March when the 1,967-MW project ran out of domestic fuel supplied by the KG Basin. The alternative fuel supplies in the international market are much more expensive, pushing up the power price.

“When domestic gas from the KG basin was available, the power cost was Rs.3.81 per unit of kWh. But, international LNG costs are much higher. This pushes up the price of power to Rs.8-9 per unit of kWh. This is not viable for us since we have access to much cheaper power from other sources. The rate in the open market is Rs 2.50-3.50 per unit of kWh. Why should our consumers pay more?” asks MSEDCL Managing Director Ajoy Mehta. The state utility decided to stop buying power from RGPPL in August.

The search is now on for new supplies of domestic gas to get the plant started again. “I have written to the Union Ministry to get domestic gas supplies to run at least one of the three units of the project,” said Mr. Chavan. Over 13,000 crore had been spent by the new stakeholders to revive the project in 2005.

A major bone of contention between the State power utility and RGPPL is the payment of fixed costs worth Rs.1,900 crore. The power utility has refused to continue this payment.

“The viability of the project rests on procuring domestic gas. Our contract with them clearly says the gas must be sourced in consultation with us and with our approval. Now, they want to source LNG from the international market, which is much more expensive, so they need to take our permission. This does not suit us because it will push up costs. So why should we continue to pay these fixed costs?” pointed out Mr. Mehta.

RGPPL says that without receiving this payment, it will be difficult for it to service its debt. “The approach of the State power utility is short-sighted because this project has value for the State even through the economic activity of power and LNG businesses and employment generation,” said the spokesperson.