The beleaguered Dabhol power plant will be restarted by the middle of November after a gap of more than four months with the Maharashtra government on Tuesday agreeing to buy electricity at Rs 5.01 per unit in view of the massive power shortage in the state.

Ratnagiri Gas and Power Private Ltd, the new owner of the Dabhol project, and Maharashtra State Electricity Distribution Company will sign an agreement for this purpose by Wednesday.

The two sides informed Central Electricity Regulatory Commission on Tuesday that Maharashtra will buy up to 700 megawatt of power from Block-II of the plant, which will be run on imported naphtha. The total cost of power comes to be Rs 5.01, which comprises Rs 4.71 as capacity charges and Rs 0.30 as incidental charges.

The agreement would include a mechanism for fuel price escalation. In case naphtha price increases in global markets, the additional cost would be pass-through and the state will buy power even if the tariff crosses Rs 5.50 per unit.

RGPPL officials told CERC that Indian Oil Corporation will import naphtha within 'four weeks' and Block-II, which was shut down in July this year after being operational for two months during May-June, would generate electricity from the middle of next month till March-end 2007.

IOC would have to import 3,80,000 tonnes of naphtha for RGPPL to operate the 740 MW Block-II for five months till March next year. However, as there is lack of adequate storage facility at the project site, IOC may import only 60,000 tonnes in the first tranche.

Although Block-II of the project would be restarted in mid-November, the other two blocks of similar capacity are likely to be started by April and June next year, by when liquefied natural gas is expected to be available.

While agreeing to the arrangement arrived at by RGPPL and MSEDCL, power regulator CERC also warned the state utility against overdrawing from the national grid at low frequency.

"In the meantime (till the project is started), do not overdraw from the grid. The grid is in precarious position and we will not hesitate in imposing a penalty if there is overdrawal at low frequency," CERC Chairman A K Basu said.

The regulator noted that there is still no date for commissioning the plant before March 2007 and said it would review the functioning of the project in January next year.