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Meeting with DPC was good, says Godbole

Priya Ganapati in Bombay

Officials of US energy giant Enron Corp-promoted Dabhol Power Company who met with the Godbole committee on Tuesday to discuss the fate of the controversial $2.9-billion power project were non-committal on the outcome of the talks, but said that the "meeting was good".

Both the sides, however, were unanimous that it would take mores discussions to arrive at a peaceful solution to the vexed issue. Tuesday's meeting was cordial and broke fresh ground, said sources, indicating that the problem may yet be resolved.

Both the parties have decided to meet again and take the discussions forward. Energy secretary V M Lal, speaking to the reporters, informed that both the parties have decided to meet again and continue the deliberations, but fresh date for the meeting has not been fixed yet.

The meeting concluded with both the sides agreeing to extend the tenure of the Godbole committee which was slated to expire on Wednesday. The period for which the panel's tenure has been extended has not yet been decided.

Speaking after the meeting Madhav Godbole, chairman of the committee set up to renegotiate the power purchase agreement with DPC, said: "The meeting was quite productive. Basically, we discussed each other's position in the issue. The Government of India has put forth a set of proposals before the DPC and we shall see how things proceed from here."

He, however, declined to spell out what the 'new set of proposals' comprised.

When asked what did the committee think of DPC's proposal to cut power tariff by 10 per cent, Godbole said: "It is too early to talk about specifics at this point. We discussed generalities and it was a satisfactory meeting."

Central government nominee A V Gokak, who attended the meeting for the first time, said: "The government is keen to resolve the vexed issue and will actively participate in the process and talks."

"The negotiations would take into account the interests of all the sides," Gokak said. "Nobody's intentions can be doubted as the deliberations are on to come to an amicable solution which is agreeable to all," he said when asked to comment on DPC's earlier posture of taking the meeting only as a courtesy call.

DPC chief K Wade Kline said that only general issues were discussed at the meeting and that the deliberations were "good". Kline said that no proposals were submitted by the DPC to the Godbole committee today.

The renegotiation committee meeting was headed by Madhav Godbole, energy secretary V M Lal, MSEB chairman Vinay Bansal, finance secretary S K Srivastav and central nominee A V Gokak, HDFC chairman Deepak Parekh.

The Dabhol Power Company team was represented by DPC chief K Wade Cline, president Neil McGregor, Bechtel representative Phiroz J Nagarwala, DPC chief financial officer S Mohan Gurunath, DPC vice-president Sanjeev Khandkar and IDBI official Mukesh Tyagi, Rajesh Sivaraman, and Paul Kraft, general counsel.

Earlier analysts had said the meeting is unlikely to yield any result as Dabhol Power Company had announced that the meeting would only be a courtesy call.

The panel was formed last month by the Maharashtra state government to renegotiate the tariffs charged by the 2,184 MW power project.

Maharashtra State Electricity Board, which agreed in 1995 to buy the plant's entire output, says the power is too costly and has defaulted on $48 million of power payments.

Dabhol issued a notice this month to cancel its power purchase deal.

The Maharashtra government has asked the panel to renegotiate the project with Dabhol and bring down the tariff.

The first meeting scheduled for May 5, was cancelled as Enron sought more time to attend the meeting, while the second meeting which was held on May 11 concluded without any transaction in which, of the nine members, five including central nominee A V Gokak were absent.

Later, it was fixed for May 23, which also had to be cancelled in wake of the resignation by the committee chairman Madhav Godbole following remarks by NCP chief Sharad Pawar about the negative attitude of the renegotiation committee.

However, the Maharashtra Cabinet unanimously decided not to accept his resignation. Maharashtra Chief Minister Vilasrao Deshmukh wrote a letter to him after the Cabinet meeting stating that "the state government has full faith and confidence in his working, and urge you to withdraw your resignation as the chairman of the committee."

An MSEB official had on Monday said that the success of the re-negotiations would largely depend on the co-operation of DPC officials as well as the Union government, particularly over the issue of the second phase's 1444 mw power offtake.

The second phase would be commissioned from October this year. After the commencement of second phase, the MSEB will have to pay Rs 5 billion per month from the beginning of next year, which is unaffordable for the MSEB.

Phase-I, comprising 740-mw power, was commissioned three years ago, but the cost of the power from the plant based on imported naphtha has made a dent in the profitability and margin of the state-owned electricity board.

Meanwhile, the Maharashtra Electricity Regulatory Commission has fixed June 14 as the next date for hearing.

Lenders' meet

Meanwhile, Indian lenders to Dabhol are scheduled meet in Bombay on Wednesday to try and find a way to protect their interests in the project, a lender said on Monday.

The meeting's top priority will be the adoption of a common strategy to convince foreign lenders not to invoke guarantees issued by local financial institutions and banks.

The project is being built at a total cost of $2.9 billion, of which $2 billion has been funded through loans. Of this amount, the local lenders have contributed $1.4 billion and foreign lenders have provided the rest.

Foreign lenders are protected by guarantees issued by domestic banks and financial institutions. They have called a meeting on June 5 and 6 in Singapore to discuss invoking guarantees on their loans in the project.

At stake is not just the investment in the project, but also India's efforts to reform the power sector. Indian lenders would also take a hit on their books if their foreign counterparts insist on payments.

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