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Reliance allowed to hawk power from Patalganga to third parties

Arijit De, S Ravindran & Renni Abraham

In an unusual departure from normal practice, the Maharashtra government has allowed the Reliance group to sell power generated by its 447-mw Patalganga power project directly to third parties if the Maharashtra State Electricity Board does not lift power.

The project's power purchase agreement has a clause to this effect.

The state government's permission to Reliance to hawk power to third parties has to be seen in the context of its dithering on forwarding to the Centre the Dabhol Power Company's bid for mega power status so that it could sell power to third parties.

DPC sources told Business Standard several weeks ago that the company's application had been pending with the Chief Minister's office for months. Only now has the state government authorised the Godbole committee to negotiate with DPC on third party sales outside the state.

The DPC project is facing the threat of closure following MSEB's inability to buy power from it, thanks to the board's weak financial position. Not only can the Reliance group sell power to third parties within Maharashtra, but it can sell power to utilities outside the state. The PPA does not expressly bar it from doing so.

Nor does it specify the category of customers to whom power can be sold. So, in effect, this suggests that the group could sell power to industrial and commercial customers in Maharashtra and emerge as a rival to the MSEB.

The state electricity board derives over 80 per cent of its revenue from such consumers.

Apart from captive power plants, independent power producers in India are allowed to sell power only to state electricity boards. They can sell power outside the state only if they qualify for mega power project status.

With its 447-mw capacity, the Patalganga project is not eligible for such status because mega power projects are supposed to have a minimum capacity of 1,000 mw.

Speaking on the sidelines of a press conference last week, Reliance Industries managing director Anil Ambani told Business Standard: "A provision in the PPA states that if the MSEB does not lift the entire power produced, we can sell it directly to third parties."

Ambani was answering a question on whether the MSEB's weak financials and inability to offer escrow cover to the project-as emphasised in the Godbole committee report set up to defuse the Dabhol crisis-would derail the Patalganga project.

"The PPA does not have any express restriction as to third party sale outside the state," a Reliance spokesperson confirmed on Friday in a faxed response to questions.

A senior MSEB official explained that the state government cleared private power projects some years ago on the basis of the unrealistically high demand projections contained in a report by a former MSEB official.

Subsequently, it was realised that the state would be stuck with excess power. So the Reliance group was permitted to sell power to third parties, he said.

The Patalganga project along with the Ispat group's 1,082 mw Bhadravati project has been put on hold till the Godbole committee submits its second report.

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