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Govt accepts FIs' suggestions on Dabhol revival

Subhomoy Bhattacharjee

The finance ministry has decided to accept the recommendations made by the financial institutions to revive the controversial Dabhol Power project, including a customs duty waiver on LNG imports and a reduction in customs duty on capital goods.

The ministry has decided to support the proposals mooted by the FI s to ensure that the imbroglio over the project is resolved soon.

While government sources said Friday's meeting of finance and power ministry officials with the FI s has not yielded much except for the decision to appoint a valuer to decide on the equity of the project, the government is in favour of supporting the proposals made by the FIs.

Sources said this will also hopefully ensure that the due diligence exercise being conducted by Tata Power is on course. The proposals made by the FIs are broadly in line with the Godbole committee report also include write down of equity by about 50 per cent and an interest servicing of bonds.

But sources said while there is yet to be a decision on these issues the waiver of customs duty on LNG imports which will be hived off from the main project, and an assumption of a reduction of customs duty on capital goods of Rs 4 billion will be decided favourably.

Sources also said there can be a problem if the Tata Power exercise does not bear fruit as there are no other proposal under consideration. They described the BSES proposal as "half hearted".

But officials have expressed disappointment over the stance taken by Dabhol Power Company in resolving the issue. They said by sticking rigidly to its stance that it will not accept any valuation of less than $1.2 billion for the project Enron Corporation has not helped matters.

According to them a complex problem of this sort can only be tackled if both parties decide to take some positive steps.

At the meeting it was been decided that since FIs have a stake in the project it will be better to rope in an independent agency to do the valuation of the equity. Sources also said the FI s are expected to apprise the government with a progress report on the issue by next week.

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