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Move to declare Enron power project a sick unit

Shiv Kumar in Bombay

The Maharashtra government is examining a proposal to declare the $ 3-billion Dabhol Power Company promoted by US-based energy major Enron Corporation a sick unit.

"The primary idea behind the move is to provide a rehabilitation package for the project, once Enron exits the venture," a senior state government official said.

He added that the move would also facilitate domestic financial institutions to lend funds to the project at a lower interest rate.

It is, however, still being debated whether the controversial unit should be brought under the BIFR.

The New Delhi-headquartered BIFR is a quasi-judicial authority that takes decisions on closure or rehabilitation of sick industrial undertakings in the country.

Enron's Indian arm had indicated last week that the US energy major -- which holds a 65-per cent stake in the Dabhol project -- will exit the project in the middle of November this year.

The decision was taken after several months of payments default by the Maharashtra State Electricity Board (MSEB), the sole buyer of electricity from DPC, on the ground that the tariff was too high.

For the purpose of offloading its stake, Enron had even valued its share of equity in the DPC at around $ 1 billion, which was contested by the Maharashtra government as being inflated.

The state government, however, has not provided its own valuation of the project thus far.

According to government sources, there are a number of suitors who have evinced interest in picking up Enron's stake in the project.

AES Transpower, a US-based energy company, had expressed such interest a few months ago, while Tata group chairman Ratan Tata had indicated that he would consider the proposal at an appropriate time.

Industry sources said at this moment the future of the company hangs in balance due to the high cost of power generated by DPC.

At peak production, the Dabhol unit was originally priced at between Rs 4 and Rs 5 per unit. In July last year, when offtake of power by the MSEB fell sharply, the electricity was billed at Rs 7.90 per unit.

Since then, Enron agreed to reduce its tariff to Rs.3.75 per unit, but it has still been unable to find buyers from among the country's various state electricity boards.

The DPC plant has been generating 740 MW of electricity in the first phase. The earlier plan was to generate a total of 2,184 MW by October this year after the completion of full project.

Indo-Asian News Service

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