RGPPL puts Dabhol power units on hold

Ratnagiri Gas and Power Pvt Ltd (RGPPL), the new owner of the Dabhol power project, has decided to delay the commissioning of two units of the 2,100 MW plant so as to keep pace with the expected arrival of liquefied natural gas in March next year.

"Block I and Block III of the project were earlier scheduled for commissioning in December this year, but with LNG expected only by March 2007 it has been decided to delay the commissioning of these two blocks to match it with the arrival of natural gas," a top government official said.

The 740 mw Block II of the project, which generated electricity on naphtha for about two months in May-June this year after a five-year gap, may restart generation from October on naphtha, the official said. But the other two units with a total capacity of 1,400 mw would not be run on the liquid fuel, he added.

However, the unit would be restarted only if Maharashtra government indicates sufficient demand and agrees to buy the costly power, he said.

"Even if the state government wants electricity on naphtha, they would not need more than 700 mw and so there is no point in commissioning the other two blocks till LNG arrives," the official said.

Sources said although the government has waived customs duty on naphtha, the electricity generated could still cost as high as Rs 6 per unit, a price which Maharashtra may find unviable for long-term purchase.

The government has granted customs duty waiver to both LNG and naphtha imports for the Dabhol power plant to make the two fuels cheaper by about 5 per cent.

The Block II was shut down on July 4 after demand dropped in the state with the onset of rains in the western region.

RGPPL, the NTPC-GAIL joint venture created to revive the project, has borrowed about Rs 8,000 crore from domestic lenders besides the equity investment of about Rs 1,700 crore for the project. While the government is targeting to tie-up LNG supplies by March next year, the LNG terminal would only become operational by June 2007.

Till then, the government plans to offload LNG at Petronet's Dahej terminal in Gujarat and transport the regassified gas through Dahej-Uran and Panvel-Dabhol pipelines.

Petronet LNG Ltd is trying to finalise supply of about 2.1 million tonne of LNG from Rasgas of Qatar as a short-term measure till 2008. Besides Petronet, state-run Gail (India) is also looking to secure long-term LNG supplies for the project.