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Maharashtra set to reject FI plan on DPC

S Ravindran

The Maharashtra government is set to reject a proposal mooted by financial institutions that the Maharashtra State Electricity Board assign a distribution zone to the new buyer of Enron's stake in the Dabhol Power Company.

"We have not received such a proposal so far. However, even if such a proposal is made it is not possible for either the state government or MSEB to accept as it would entail a huge financial loss," state energy minister Padamsinh Patil said.

Patil said any new private sponsor of the power project would be interested in having an area with predominantly industrial consumers for its distribution zone. "In that case, how do we subsidise the agricultural and residential consumers?" Patil said.

Traditionally, state electricity boards across the country have subsisted by selling power at higher rates to industrial customers and using the proceeds to cross subsidise residential and agricultural consumers.

The domestic financial institutions have suggested a three-pronged formula for buying the 2,184 mw power generated by the DPC. The first phase of 740 mw, they have suggested, should be absorbed by MSEB.

The second phase of 1,444 mw consists of two blocks of 722 mw. Power from one of these blocks should be bought by the National Thermal Power Corporation, while another 722 mw should be sold in a distribution zone currently with MSEB.

The institutions have also said NTPC could in turn sell the power to other state electricity boards.

The domestic financial institutions led by the Industrial Development Bank of India are now scouting around for a buyer for Enron's stake in DPC after the US-based energy major decided to pull out of the project following a payments dispute with MSEB. Tata Power has emerged as the front-runner for buying this stake.

The institutions attempts to find a buyer for the stake have so far been stymied with Enron refusing to sell at a discount. The US-based transnational and its two partners General Electric and Bechtel who hold a combined stake of 85 per cent in DPC are insisting on a price of $1.2 billion.

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