Dabhol equity buy may be approved today

The plans of three promoter companies to pump additional equity into Ratnagiri Gas and Power Pvt Ltd (RGPPL), the company that runs the Dabhol plant, are likely to be approved at the next meeting of the empowered Group of Ministers (EGoM) scheduled on Tuesday, officials said.

The three promoter companies are Maharashtra Power Development Company Ltd (MPDCL) which has 15 per cent stake in RGPPL and plans to invest an additional Rs 250 crore, NTPC Ltd and Gail (India) Ltd, which hold 28.5 per cent each in the power generation company and will invest Rs 475 crore, each.

The funds would be used to meet the cost overrun for the construction of the LNG terminal. Industry sources say this will completely bury the speculations about hiving off the terminal.

Initially, the cost of construction at Dabhol was expected to be around Rs 2,800 crore but in the final analysis it was estimated to be about Rs 4,000 crore for completing the project along with break water facility.

The financial institutions that hold about 27 per cent stake in the company had refused to invest further in the project. Initially, NTPC and GAIL were also reluctant to invest further and suggested hiving off the LNG terminal.

But after Maharashtra government's offer to invest in the project, GAIL and NTPC also agreed to pitch in, sources said.

The petroleum ministry also opposed hiving off the terminal as they felt running an LNG terminal as a stand-alone entity was not feasible. Considering the cost overruns, the prices quoted by prospective bidders would not be too attractive, ministry had said.

The 5.5 million tonne per annum (mmtpa) terminal is expected to complete by 2008 without break water facility and with break water facility in 2010.