The Maharashtra Cabinet committed the state to purchasing 1,100 mw of power from the revived Dabhol Power Company, Chief Minister Sushilkumar Shinde said.

The government also decided to set up a negotiating committee under principal secretary (energy) Jayant Kawle to consider an Industrial Development Bank of India and Union finance ministry proposal that seeks multiple incentives for the promoters of the DPC power project.

Currently, the British Petroleum/Tata Power Company TPC) combine, British Gas, Shell and Reliance Power are seeking to take over the DPC project.

Briefing media persons after the weekly state Cabinet meeting, the chief minister said: "The Union government through the ministry of finance and IDBI have placed a proposal before us that seeks several incentives for the new promoters of the DPC project. Our efforts are to scale down the Rs 2.80 per unit tariff proposed by them and peg it at a more reasonable (that is, lower) level."

Responding to a specific query on the factoring in of fluctuations in foreign exchange rates as well as the international prices of naphtha, the chief minister said a cap is sought to be placed on tariffs, so that the price of DPC power does not spiral, as happened when Enron was operating the plant.

"We will not allow fluctuations (in foreign exchange rates and oil prices) to impact the tariff price of DPC power unreasonably. The fact is that Maharashtra is experiencing a 2,100 mw shortage of power today and the revival of the DPC power plant will go a long way in augmenting the power shortage in the state," Shinde added.

He declined to elaborate on the nature of incentives sought by the IDBI/Union government proposal, stating that a negotiated decision would be taken by the Kawle committee.

However, according to informed sources, the package of incentives sought by IDBI/Union government are all aimed at keeping the tariff per unit of power affordable.

For instance, whenever the DPC project is sold to a new power company, the buyer will be required to pay a huge stamp duty. This cost would in turn be loaded on the tariff of the revived DPC plant.

So stamp duty is being sought to be exempted. Similarly, customs duty on the equipment imported for the project by Enron has not been paid and the buyer will have to pay this.

This is being sought to be exempted. DPC also has unpaid Maharashtra State Electricity Board bills against which several rebates had been accorded to DPC. The state government is considering whether the entire or part of this amount may be set off to facilitate DPC's revival.

According to officials, in excess of 20 concessions have been sought for the promoter of the revived power plant. "The problem is that the state government is now averse to some of the incentives that are being sought under the IDBI proposal. However, disclosing these at this juncture would put us in at a disadvantage during the forthcoming negotiations with the Centre and IDBI," a stage government official said.