Ratnagiri Gas and Power Pvt Ltd, the GAIL-NTPC joint venture, which owns the Dabhol plant, had estimated at Rs 710 crore (Rs 7.10 billion) the cost for completing 15 per cent of the balance work on the 2.5 million tonnes LNG import and regassification terminal when they took over the Enron-owned plant last year.

"The terminal needs an additional Rs 1,000 crore (Rs 10 billion)," the official said. Together with the transfer cost of Rs 1,790 crore (Rs 17.90 billion) the total cost of the LNG unit would come to about Rs 3,500 crore (Rs 35 billion), a price in which a new 7.5 million tonnes per annum LNG plant can be built.

The official said cabinet secretary B K Chaturvedi at a review meeting on August 21 observed that the LNG terminal may be hived-off and sold to Petronet LNG Ltd [Get Quote], which would also be responsible for sourcing of liquefied natural gas.

As per the asset transfer agreement, the Indian lenders were to bear the additional cost for completing the terminal.

"Such a huge cost overrun is not acceptable for the lenders," he said, adding that the LNG plant was to be completed by 2007 but now would only be commissioned in July 2009.

Besides, GAIL has not made much progress in sourcing of LNG for the power plant. At the meeting, the state-run gas utility informed it was close to contracting 1.2 mtpa LNG from Algeria at a price more than $7 per million British thermal unit.

While the price is double the expectation, the quantity was much less than the 2.1 mtpa LNG requirement of the power plant, the official said.

The official said while about Rs 225 crore (rs 2.25 billion) was cost overrun in award of contracts to complete the unfinished terminal, most the remaining was for construction of a breakwater, which the owners had not previously anticipated.

Besides, the interest during construction period had overshoot to Rs 200 crore (Rs 2 billion) from Rs 64 crore (Rs 640 million) previously estimated.

Petronet is incidentally also sourcing the short term LNG for plant. It is arranging gas from Qatar for period 2007 to 2009. GAIL had earlier indicated that long-term term LNG was to be available from July 2009.

The official said that as per the earlier schedule, breakwater commissioning was to happen in May 2007 but is now revised to July 2009.

"The commissioning of the LNG receiving terminal... has been delayed," he said, adding that without the breakwater, ships carrying LNG cannot dock at the port for almost 90 per cent of the time.

Now, the need to build breakwater has been emphasised by technical consultants and the facility would now be built by 2009.

However, Petronet would import LNG from Qatar at its Dahej terminal in Gujarat and transport it to Dabhol through the Dahej-Uran and Panvel-Dabhol pipeline, he said.