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August 25, 2001
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Govt asks Dabhol to complete 2nd phase

BS Economy Bureau

The government has told Dabhol Power Company that it must complete the construction of the second phase of the project. Simultaneously, it has told Indian lenders to this project to furnish details of additional funds that would be required to complete the second phase.

The Indian lenders, primarily the state-owned financial institutions, are expected to provide these details to the finance ministry by Monday. According to one estimate, the additional funds requirements could be around Rs 22 billion.

Almost 95 per cent of the second phase of the Dabhol project has already been implemented. The additional funds requirement would include the cost to be incurred on completing the remaining five per cent of the project work and the cost of delays caused by the controversy.

The government move on ensuring completion of the second phase of the Dabhol power project is part of an action plan aimed at resolving the controversy over the Enron-promoted company.

In view of the controversy over tariff and its dispute with Maharashtra State Electricity Board, Enron had offered to withdraw from the project provided the government bought its equity (65 per cent of total equity estimated at $1 billion) at cost.

Official sources said that the completion of the second phase was necessary in order to ensure that Enron's pull-out did not jeopardise the project and the new buyer could run the power plant without any financial problem.

A group comprising Indian lenders to the Dabhol project and the current top management team of Dabhol Power Company met senior government officials on Thursday and discussed the action plan to save the power project, which has been idling for several weeks. The action plan will include a new time-table for completing the second phase of the project.

The government is also insisting on a no-objection letter from the Maharashtra state power authorities to the effect that once all pending issues are resolved, they would allow the Dabhol project to wheel the power generated by it to other states.

Maharashtra at present cannot consume all the power the Dabhol project will generate once its second phase is completed.

The contentious issue of tariff too has to be settled, the sources said. At present, efforts are one to bring down the tariff of the Dabhol power to a level where state electricity boards in the states adjoining Maharashtra are inclined to purchase.

The current cost of Rs 4 per unit is not acceptable to most state electricity boards, although the cost in any new plant in the country will be no less.

The government has also lined up about half-a-dozen parties including a public sector power utility , which are agreeable to consider buying the Enron equity in Dabhol Power. The sources declined to divulge the names of these parties, but said that this issue had to be resolved in the next few weeks.

Prime Minister Atal Bihari Vajpayee is scheduled to visit the US in September and current efforts are aimed at resolving the controversy before his visit.

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