The proposal to hive off the liquefied natural gas terminal at the revived Dabhol power plant in Maharashtra is likely to be scrapped, with promoters and financiers agreeing to pump in Rs 2,400 crore (Rs 24 billion) to restart construction work at the plant.

NTPC and GAIL (India), the promoters of Ratnagiri Gas and Power, which operate the power plant, have put in an additional Rs 500 crore (Rs 5 billion) each into the project. A Rs 1,400 crore (Rs 14 billion) loan is being provided by Power Finance Corporation.

"The terminal is an integral part of the power plant. Now that financial closure for the plant, including the LNG terminal, is likely to be achieved in a month, there is no need to hive off the plant," a senior government official said.

RGPPL has already informed the restructuring committee, headed by banking secretary Vinod Rai, that the LNG terminal hive-off is not needed any more. "With the additional money being put in, the reason for hiving off the LNG terminal no longer exists," a senior RGPPL official said.

The restructuring committee, formed to look into the revival of the Dabhol power plant, last met on April 10 this year. It is scheduled to meet shortly to take a final decision on the project.

The cost of reviving the Dabhol power plant has increased by around Rs 2,594 crore (Rs 25.94 billion) to Rs 12,897 crore (Rs 128.97 billion). Through the additional money pumped in by the two promoters and the loan from PFC, RGPPL has already raised Rs 2,400 crore.

The company is also looking to sell some power from the plant to the highest bidder to mobilise additional funds. Under an interim arrangement, power from Dabhol is bought only by MSEB for Rs 5.10 per kilowatt hour.

Analysts say that not hiving off the five million tonne per annum (mtpa) LNG terminal will increase the viability of the Dabhol power plant which is currently not making any profits at all. "The LNG terminal is the only part of the project which is currently being considered profitable," a Mumbai-based analyst said.

The LNG terminal, 75 per cent of which has already been constructed, would be fully completed by September this year, officials said. Of the five mtpa that the LNG terminal can handle, only 2.1 mtpa of gas would be required for running the Dabhol plant. The rest can be traded, which would increase the profitability of RGPPL.

At present, only one 750 mw unit of the power plant's three units (totalling a capacity of 2184 mw) is producing electricity using naphtha as feedstock since gas is not available. Naphtha is currently priced at around $14 per million British thermal unit (mBtu), while the price of LNG is around $8-9 per mbtu.

Since reports of hiving off the LNG terminal broke, both GAIL and NTPC have been at loggerheads over who gets the first right to own the terminal, with each company saying the synergy for the terminal lay with them.

There have also been reports that the terminal may be put on the block. RGPPL is not in favour of hiving off the LNG terminal to a third party, since there is synergy between the power plant and the LNG terminal. This is the stand the power ministry is taking as well.