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Government plans open bids for Dabhol Power

P Vaidyanathan Iyer & Anil Sasi

The government is considering an open bidding route for the beleaguered $3-billion Dabhol Power Company. A final decision will be taken once the "tariff re-engineering" exercise aimed at bringing the power cost below Rs 3 per unit is complete.

According to senior government officials, the commercial bids could be floated without affecting the due-diligence process now underway by the two prospective suitors, Tata Power and BSES Ltd.

"Even National Thermal Power Corporation can consider buying the foreign equity when the financial institutions call for commercial bids," a top official said.

Earlier, NTPC had written to the power ministry explaining why it was not interested in taking over the 2,144-mw Dabhol project. The high cost of power of about Rs 6 per unit was cited as one of the main reasons for its aversion to acquiring the plant.

It had said that the current structure of the project, both financial and operational, left little scope for any power producer to reduce the cost.

The FIs are likely to submit the final proposal, on the sacrifices to be made by all the stakeholders, to the finance ministry by mid-January. While the original promoter Enron Corp would have to take a hit in its equity, the Centre would grant DPC a mega power project status with tax sops therein.

The FIs, on their part, would reduce the cost of loans and the Maharashtra State Electricity Board would have to assure a minimum offtake from the plant.

Sources said the FIs have sought a legal opinion after the parent company, Enron Corp, filed for bankruptcy in the US. Power minister Suresh Prabhu had also said a few days back that a legal opinion was awaited from the law ministry.

The Godbole panel had recommended hiving off the LNG terminal besides converting the dollar-denominated loans into rupee loans to impart stability to the cost of the project. FIs have an exposure of over Rs 60 billion excluding guarantees to foreign lenders, worth another $1.2 billion.

Sources also said that a "policy package" for DPC had been cleared at the highest level in the government. However, they said the Centre was unlikely to ask the FIs or NTPC to buy foreign equity in the company directly. "It will be a purely commercial transaction," they added.

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