Dabhol set for split but fuel supply issues remain

Dabhol set for split but fuel supply issues remain

The stage is set for a demerger of Ratnagiri Gas & Power (Dabhol) project into two entities, with GAIL dealing with the gas block and NTPC running the power plant, but the project is unlikely to be without problems with fuel supply remaining a major concern. Railways is pitching to buy electricity from the troubled plant

Sources said that there is near unanimity on demerger after a PMO-appointed panel suggested a similar roadmap but question marks remain over the availability of gas with supply of only 0.9 mmscmd available so far and the company has sought more domestic fuel in the next round of auction. But even with the enhanced supply, it would only be able to run half of one block and is expected to generate around 330 mega watts. 

Dabhol has a capacity of 1967 MW, split into three blocks, but has been unable to run for want of demand for power at the price at which it can produce electricity. In the absence of domestic gas supply, the power plant has to run on imported liquefied natural gas (LNG), which makes generation costs unviable at a time when tariffs are low due to weak demand.

The project, which was set up by the now-defunct Enron, has been causing headache to the lenders and the government for nearly two decades and has now reached a stage where banks have read the riot act, prompting the Centre to act. In fact, the project was taken up for review at the level of the PM’s Office and a group was tasked with preparing a revamp plan. 

But fuel supply is not the only issue. Evacuation of power is the other problem although Railways, which is looking to trim its fuel bill, is the likely buyer. Railways has been asked to seek a distribution company licence from the central power regulator to buy power. With a licence, Railways can hope to buy power at around Rs 4.70 a unit, including subsidy of over Rs 1.50 a unit. Otherwise, it would have to shell out at least Rs 6.60 a unit. 

Sources said the panel has also recommended that the Maharashtra government offer concessions to make the unit viable and in return may be given a two-year moratorium in clearing its dues to lenders, which are estimated at around Rs 2,000 crore.


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