Shape up by 2007 or be ready for sellout, Dabhol told

The government today gave an ultimatum to Ratnagiri Gas and Power Pvt Ltd, the NTPC-led company running the 2100 Mw Dabhol power project.

At an emergency meeting of the empowered group of ministers, NTPC was told that if it did not succeed in having the plant up and running to full capacity by December 2007, the entire facility would be sold to a private company.

A private Indian conglomerate was named and discussed as a prospective buyer at the meeting, strengthening the impression that a "distress sale of Dabhol is now only a matter of time".

The ministerial group, headed by Defence Minister Pranab Mukherjee and comprising Agriculture Minister Sharad Pawar and Petroleum Minister Murli Deora, also decided that an additional Rs 500 crore would be invested in the project by the promoters.

"We have given the project developer one year to complete commissioning, failing which the project will be sold," a senior government official said.

The project was scheduled to be fully operational by the end of this year. The company managed to start one unit of 740 Mw this summer using naphtha.

However, it was shut down later because the Maharashtra State Electricity Board refused to buy power at Rs 4.30 per unit. Work on commissioning the remaining two units was to end by December.

"The new developers have faced immense difficulties, including lack of cooperation from international principals, which are blackmailing NTPC," the official added.

One of the difficulties has also been the lack of liquefied natural gas supplies. Ratnagiri Gas and Power is jointly promoted by NTPC and GAIL and was set up to revive the erstwhile Enron-owned project.

The company has borrowed around Rs 8,000 crore from domestic lenders, in addition to equity investments of about Rs 1,700 crore, for the project.