'I refuse to sign a document saying I will under-recover my cost'

Q&A/ Chandan Roy

Controversies are never-ending with the Ratnagiri Gas & Power Private Ltd (RGPPL), the former Dabhol Power Company. Now, speculations, that the management of the 2184 Mw gas-based project does not have a say, have surfaced. But Chairman Chandan Roy, while rubbishing such claims, tells Sapna Dogra that the project is facing a funds crunch. Excerpts:

When is the stalemate on the RGPPL power plant likely to end?

It is likely to end in a few days. The government is close to resolving the contentious issue of who will bear the project revival cost, which has increased from Rs 10,303 crore to Rs 12,895 crore.

RGPPL has an agreement with the lenders that ensures that the project cost beyond Rs 10,303 crore is borne by the lenders (led by IDBI and Power Finance Corporation). However, the lenders don't want to bear the increased cost.

(On the March 1, reports that Maharashtra government had agreed to pay Rs 3.30 per unit for Dabhol power against their earlier demands for Rs 3, Roy said there was no agreement on the cost of power and no offer from Maharashtra)

So how is work progressing at the plant?

The project has come to a grinding halt because there is no funding. Even the Power Finance Corporation (PFC), stopped releasing funds after giving Rs 350 crore of the Rs 1,400 crore it had committed to for Block III. The Maharashtra State Electricity Board (MSEB) had also committed Rs 450 crore to revive Block II by April 30.

However, the Maharashtra government has now tied the release of these funds to signing of a power purchase agreement (PPA) with a fixed cost component of 96 paisa per unit. These two issues should not be clubbed.

So when will the PPA be signed?

It came up in the last Empowered Group of Ministers (EGoM) meeting, but I refuse to sign a document saying I will under-recover my cost. No commercial venture company will sign a document saying that it will under-recover its' cost. Now, the government has asked the secretary, banking and infrastructure to look into this issue.

The fixed cost of 96 paisa per unit has gone up to 107 paisa, provided all three power blocks are operational by November 2007. But everyone wants RGPPL to sign the power purchase agreement (PPA) at 96 paisa. If we did that, there would be under recovery of 11 paisa.

What would be the likely cost of power?

Assuming all three power blocks are operational and gas is available at about $6 per million british thermal units (mmbtu), it should cost around Rs 3.22 per unit with a fixed cost at Rs 1.07, fuel cost of Rs 1.96 and 19 paisa of regassification cost.

Do you think the LNG terminal should be hived off?

I heard it for the first time in the last EGoM. LNG gets lot of governmental concessions, so what will happen to these concessions if LNG is hived off? LNG terminals also handle lot of coal available free of cost. This idea needs more examination.

A proposal to declare one of the 700 Mw units of the plant as a merchant power plant (which can sell power outside the regulated pricing regime) has also been mooted. But there are several legal and regulatory issues with such proposals.

Is it true that management of RGPPL is not kept in the loop when government takes crucial decisions?

I think that's an unfair comment. RGPPL is in the loop. The problem is everybody is approaching the government. For instance, the lenders have approached the government because that they don't want to absorb the increased cost.
 

POWERFUL DIFFERENCES Comparison of project cost              (In Rs crore)
Item	EGoM   approved	Current  estimate	Increase
Asset cost	8,485	8,485	Nil
Revival cost	870	1,957	1,087
IDC	683	2,188	1,505
MSEB equity	265	265	Nil
Total	10,303	12,895	2,592
(IDC: Interest during construction)      Source: RGPPL