Part of Dabhol unit may turn merchant plant

A third of the 2,100 Mw capacity of the Dabhol power plant may be turned into a merchant power plant.

Ratnagiri Gas & Power Pvt. Ltd. (RGPPL), the present owners of Dabhol, have proposed to run the 700 Mw block III of the plant as merchant plant to off set losses from its other generating units.

The proposal was accepted by the finance ministry at a meeting called by the banking secretary in New Delhi today and will be forwarded to the empowered group of ministers (EGoM), headed by the external affairs minister Pranab Mukharji. The EGoM is slated to meet on 14 March to discuss the issue.

Sources close to the development said that financial institutions, worried by the cost over-runs on the project have suggested that about a third of the 2,100 Mw capacity of the power plant should be turned into a merchant plant which can sell power at a price higher than what the Maharashtra government is willing to pay.

The current cost over-runs on the project is in the region of Rs 1,000 crore. The FIs are expected to shell pout close to Rs 1,800 crore for a full refurbishment of the plant.

Sources said, "When we decided to finance the project, the price of gas was in the region of $3 to 4 but now it has gone up to $7-8 in the spot markets, making the plant financially unviable. So we have proposed to turn a part of it into a merchant plant."

He added that the price of power from the merchant facility would be priced around Rs 4 a unit. Maharashtra is expected to buy power at Rs 3.30 a unit.

RGPPL's proposal has sent shivers down Maharashtra's political establishment as the state is already fighting with huge power shortage to the tune of 5,700 Mw.

Sources also said that the earlier plan of hiving off the LNG storage facility was still also under consideration. "Several parties expressed interest in that facility," he said.

RGPPL's proposal has sent shivers down Maharashtra's political establishment as the state is already fighting with huge power shortage to the tune of 5,700 Mw and it was heavily banking upon to get 2,100 Mw power from Dabhol plant.

The government of Maharashtra is banking heavily on the fact that RGPPL's proposal would not be accepted by EGoM as four key ministers in EGoM are from Maharashtra "" Union Power Minister Sushilkumar Shinde, Petroleum Minister Sushil Kumar Shinde, Agriculture Minister Sharad Pawar and minister of state in the Prime Minister's Office Prithviraj Chavan.

On the other hand, Maharashtra government is not ready to the pay fix price of 106 paisa per unit as demanded by RGPPL.

They are sticking to their stand of not paying fixed cost beyond 96 paisa. No breakthrough was achieved on this issue during the meeting called by chief minister Vilasrao Deshmukh on Thursday between RGPPL and the state government.

Meanwhile, five workers died in a mishap at a project site of Ratnagiri Gas and Power Pvt Ltd, near Chiplun in Maharashtra today, police said.

The men, working for Punj Loyd, were descending into an 80-metre LPG tank for repairs when the chain of the lift carrying them snapped this morning.