Dabhol power could be too hot to handle

MUMBAI: Surging naphtha prices and the delay in fixing tariff on the part of Maharashtra Electricity Regulatory Commission (MERC) are putting pressure on Dabhol power plant, which is planning to restart operations in October.

On August 25, MERC is organising a public hearing in Mumbai on a petition filed by MahaVitaran, for a tariff hike of 29% to make up for its accumulated losses of Rs 5,462 crore. The price of Dabhol power will be discussed in the public hearing. MahaVitaran is the distribution unit of Maharashtra State Electricity Board (MSEB).

Ratnagiri Gas and Power (RGPPL) had shut down production in early July as its sole customer MSEB had stopped buying electricity from the plant. Now, lenders like SBI, ICICI Bank and IDBI are also putting pressure on the power company as they fear for the commercial viability of plant. The mounting project cost for the yet-to-be completed phase II, is a big worry for them.

Close on the heels of raging crude prices, the price of naphtha has risen to $640 per tonne from $570 per tonne in June. “The price of naphtha is hovering between Rs 30 and Rs 33 per kg in the country, thus the fuel cost for generating will be around Rs 6 per unit. Due to the towering project cost, the capacity charge of the Ratnagiri plant has gone up to Rs 2.52 per unit. An additional cost of 21 paise, which includes naphtha shipping, will add to the burden and push the Ratnagiri power price to over Rs 8 per unit,” said sources.

Chandan Roy, chairman, Ratnagiri Gas and Power (RGPPL), which is running the plant now, told ET, “We hope power generation can begin at any time if MSEB agrees to buy. We have filed an application to MERC and expect a decision soon.”
Industry sources said MahaVitaran, will face an acute shortage of power from October ’06, and lack of supply from Dabhol will add to the shortfall by another 700 mw. “But the company cannot buy power at the price equivalent to liquid fuels,” source said.

If RGPPL can source liquefied natural gas (LNG) then the per unit cost will come down to Rs 5.34, at the current market price of LNG. Gail (India) was in discussion with many companies including Qatar-based RasGas for an annual supply of 2.5m tonne of LNG for the Dabhol project. But Gail sources said nothing has been finalised on gas sourcing.

For acquiring the project assets from the erstwhile Dabhol Power Company, RGPPL had borrowed Rs 7,011.85 crore from financial institutions. Besides, the government had roped in NTPC and Gail to commit an equity investment of Rs 500 crore each for the revival of the project. Now, the company needs Rs 1,600 crore for the renovation of the rusting blocks of RGPPL.