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MSEB may buy DPC power at Rs 2.86 per unit

Maharashtra is considering proposals to resume buying power from bankrupt Enron Corp's $2.9-billion Indian unit that has been idle for more than a year, a senior government official said on Monday.

The Maharashtra State Electricity Board has worked out a maximum tariff of Rs 2.86 per unit with IDBI-led Indian lenders to the defunct Dabhol Power Company for drawal of power from 658 mw phase I of the idle project at a 75 per cent plant load factor.

"We are stil considerig several options, but Rs 2.86 per unit is the lowest possible component indicated by IDBI to MSEB, which is based on the current prices of naphtha in the international market," the official said.

"The state cabinet will take a final decision in this regard in the next few weeks," the official in the state's power ministry, said on condition he not be named.

He said the government was looking at a complex pricing formula that state utility, Maharashtra State Electricity Board, could pay for the power produced by Dabhol Power Co.

Officials say the power plant, once showcased as India's success story in attracting foreign investment, has deteriorated during the long shutdown.

The unit, in which Enron holds 65 per cent equity, shut down its plant in May 2001 because MSEB, its sole customer which was nearly bankrupt, stopped buying power saying it was too costly.

In July, Maharashtra, one of India's most industrialised state and home to the financial capital of Bombay, allowed MSEB to pay Rs 2.25 a unit for Dabhol's power after it faced a shortfall of more than 1,000 MW of power.

But the offer was turned down by Indian lenders, led by Industrial Development Bank of India, who said it was too low. The lenders now control Dabhol.

They say they need Rs 2.86 per unit to make the plant viable, comprising of Rs 2.22 per unit charge for naphtha, a key input, and another Rs 0.64 a unit for fixed costs.

About 30 financial institutions lent $1.9 billion to the project. GE, which made the plant's turbines, and San Francisco-based contractor Bechtel Corp, which built the plant, each own 10 per cent. The remaining 15 per cent is held by MSEB.

The 740 MW first stage of the plant began operating in 1999. The 1,444 MW second phase was nearly complete when construction halted after the MSEB fell $240 million behind in payments.

MSEB, which posted losses of more than three billion rupees ($61.9 million) in the year ended March, is reluctant to pay more.

"We have already said that we will incur losses at a rate of Rs 2.25. Now the losses would widen at the Rs 2.86 rate," a senior MSEB official said.

"It's up to the state government whether it wants us to buy at this rate," he said. "If the government goes ahead with a new pricing formula, it will have to find ways to compensate our losses."

India's new power minister, Anant Geete, said last week the government was keen to quickly restart the Dabhol unit.

"We are discussing the matter with the state government and hope to see some solution (emerge) in the next two months," he said.

"Ultimately it is the regulator which will decide whether MSEB should be permitted to purchase DPC power at the prescribed rate," the official stated. The official said the price arrived at was a mix of fuel cost, fixed charge, interest and maintenance costs for the offtake of power from phase I.

According to industry sources, the current landing costs of naphtha in Mumbai is around Rs 13,380 per tonne.

Earlier, financial institutions had outrightly rejected state government's offer of resuming DPC power at Rs 2.25 per unit at a 50 per cent plant load factor.

Additional inputs: PTI

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