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Enron India unit to lower tariff from Feb

US energy giant Enron Corp's Indian unit said on Friday it will lower tariffs from next month in a bid to defuse criticism it charges too much for the electricity it produces in Maharashtra state.

The rate will drop to around Rs 4 per unit, a spokesman for Dabhol Power Company, Enron's local unit, told Reuters. He could not provide the current rate.

"The drop in global oil prices and stable exchange rate has made this possible," the spokesman said, adding the new rate is contingent upon the state government buying at least 90 per cent of the power produced.

Enron is spending about $1.9 billion to build a facility to generate 2,184 MW of electricity. A first part is already operating, and the entire plant is expected to be completed later this year.

The profit has been the subject of controversy since the mid-1990s, when a newly elected ultra-nationalist government scrapped a contract for the project that Enron had negotiated with the previous government.

Last month, the Maharashtra government decided to review the rate at which it buys power from Dabhol Power, saying the high cost was threatening its finances.

India, which needs to generate an additional 100,000 MW of power within the next decade to meet growing demand, is desperate to attract foreign capital. But after nearly a decade of liberalisation, Enron is among the few private power companies to begin generating power in India.

Four firms have already quit the country, while the projects of some others are stuck due to bureaucratic and legal hassles.

The spokesman said the cost of naphtha, the main fuel burned by its Maharashtra plant, has fallen to nearly half from levels last October and November.

When the second phase of the plant comes on line later this year, the entire facility will burn liquefied natural gas exclusively.

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