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Dabhol compromise at Rs 2.76 per unit

Sidhartha & Anil Sasi in New Delhi

The Dabhol logjam has been finally resolved with the Indian lenders and the Maharashtra State Electricity Board arriving at a consensus on the power offtake price from the first phase of the 744 mega watt project at Rs 2.76 per unit.

The Maharashtra state Cabinet will meet shortly to ratify the decision following which the plant, shut for well over a year, will go on stream.

"Following a clearance by the state Cabinet and the state regulatory commission, the issue of involving a third party like the National Thermal Power Corporation for restarting the plant will be decided by the two parties," a senior power ministry official told Business Standard.

The concessions built into the agreement for bringing down the price include a waiver of excise duty on naphtha by the Centre, and toning down of interest rates by the lenders.

As per the calculations, the final price Rs 2.76 per unit had been arrived at, based on the fuel price per unit at Rs 2.12 (Rs 14,400 per metric tonne of naphtha), operation and maintenance cost of 24 paise, and interest payment of 40 paise per unit, officials said.

This is based on the assumption that indigenous naphtha will be used for the project, and there will be no return on equity and zero depreciation during the initial period.

Maharashtra had also been asked to forego sales tax on naphtha to keep the cost of fuel down, officials said.

The issue had been resolved on the basis of calculations made by the lenders in July, when they had indicated to the Maharashtra government that it would not be feasible to sell power below Rs 2.50 per kilowatt hour because the cost of generation at 75 per cent plant load factor worked out to Rs 2.94 per unit.

The lenders' offer had come in the wake of the Maharashtra government's earlier decision to evacuate 50 per cent of the generation of Phase I at Rs 2.25 per unit.

In order to break the imbroglio, both the Prime Minister's Office and the finance ministry stepped in and held meetings with the Maharashtra State Electricity Board and the lenders.

The best price of Rs 2.50 per unit arrived at by the lenders in July factored in a large number of concessions including excise and sales tax concessions amounting to 41 paise per unit as also a lower interest cost on rupee loans as well as foreign currency loans.

While calculating the tariff of Rs 2.94, the lenders have reduced the interest rate on rupee loans for Phase I to 13.5 per cent against 16.5 per cent now. The institutions and banks are also of the opinion that the interest rate on working capital will be 15 per cent.

The lenders have also not factored in any return on equity because they were of the opinion that by just keeping the plant running, Dabhol Power Company will be able to pay the interest component of the debt.

This will help the institutions in avoiding provisioning the project as a non-performing asset.

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