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May 23, 2001
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DPC tangle: Centre adopts wait & watch policy

Subhomoy Bhattacharjee & Santosh Tiwary

The Centre will await the outcome of the conciliation proceedings before deciding on its next step about the Dabhol Power Company.

Talking to Business Standard, senior finance ministry officials said the central government representative AV Gokak has already been suitably briefed about the affair and the centre is looking forward to the outcome of the proceedings.

The sources said since the preliminary termination notice has been sent by DPC to the Maharashtra government, the Centre cannot take a stand on the issue without the state asking it to intervene.

They also said since there is a mandatory time period of six months between the serving of a PTN and the implementation of the same, the conciliation can proceed.

Officials of the finance and power ministries have meetings with Gokak last week to sieve through the entire legal position between the company, the state and the central governments.

However, they agreed that the conciliation proceedings cover a very small portion of the dispute involving only the pending bills of DPC for December amounting to Rs 1.03 billion and will not solve the entire issue of electricity purchase between the company and the Maharashtra State Electricity Board.

Since the bills for the successive months have also run into problems it has created the possibility that the project may be terminated.

Though the sources said that since the company has already invested a substantial sum for the second phase, it will not be very keen to withdraw from India abruptly.

Incidentally the Godbole committee for renegotiating the power purchase agreement with DPC is slated to meet tomorrow in Bombay.

The officials also said that though the lenders to the project, which includes IDBI have approached the finance ministry to enquire about the stand of the centre, they have been told that the Centre can do very little about it.

This is because the contract as drawn up is between the Maharashtra government and the DPC with the Centre only standing as a counter guarantor.

The wait and watch policy of the Centre is also dictated by the political compulsions, with the centre deciding to let the state government do all the talking.

The total amount of guarantee that will come into play if the project is terminated is about $300 million. Since the second phase of the project does not involve any further counter guarantee the liability for the government will not rise.

The sources also said no letter has been sent to either Enron or DPC till now.

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