MSEB holds Dabhol funds for lack of PPA

NEW DELHI/MUMBAI: The Dabhol power project’s troubles never seem to go away. First, the Power Finance Corporation stopped disbursement of Rs 1,050 crore of the Rs 1,400 crore it had committed for the project in the absence of a gas supply agreement (GSA) and power purchase agreement (PPA). Now, its white knight Maharashtra State Electricity Board (MSEB)

Holding has decided not to provide Rs 450 crore for the power blocks I and III of Dabhol (rechristened Ratnagiri Gas and Power Project). MSEB Holding’s reason: the absence of a GSA and PPA.

The project requires nearly Rs 1,000 crore to complete work on the power block and LNG terminal. Of this, Rs 450 crore is on account of the power blocks. MSEB Holding had committed to provide the funds by February 28.

The good news, however, is that at least the currently operational power block II will be fully functional, thanks to MSEB Holdings’ advance payment of Rs 55 crore. This money will help pay for the repairs necessitated by the router faliure in the block.

Senior officials said MSEB Holding had stepped in with its offer of funds when RGPPL had run out of the bridge loan of Rs 400 crore from PFC. Earlier PFC had said it would not be able to disburse any more funds due to the lack of a PPA or GSA. The deadline for inking the PPA was November.

“Due to lack of funding, RGPPL is now stuck with a generation of 343 mw. The problems erupted when PFC had stopped the release of committed fund of Rs 1,400 crore after giving first instalment Rs 350 crore. This fund was for the completion of block III, that is suppose to start generation from November 2007. Secondly, the 670 mw block I’s revival has been delayed owing to the withdrawal of MSEB. Moreover, Petronet’s failure in entering into a contract for LNG is adding fuel to the fire,” said a source.

RGPPL chairman Chandan Roy told ET, “Block II is running on naphtha and generating 350 mw. We expect the plant to get LNG from March 31. The responsibility of sourcing LNG is entrusted with Petronet LNG and Gail.”

Earlier, the government of Maharashtra had ensured RGPPL the release of funds from MSEB to signing of a power purchase agreement (PPA) with a fixed cost component. Now the government is keeping silence about the fund because the wind is in favour of them. Last week, MSEB had cut down the load-shedding as the electricity shortage in the state has reduced to a 4,000 MW. MSEB officials pointed out that electricity used for irrigation has come down in March, that reduced the demand-supply gap.

A financial package for the power project would be one of the issues to be discussed by the empowered group of ministers when they meet next week. At the last meeting the ministreis of finance and power and the government of Maharashtra were asked to work out a mutually acceptable proposal to give the project a fresh lease of life.