The Ratnagiri Gas and Power-promoted 2184 mw Dabhol project is in serious trouble. Since some crucial assumptions do not hold true any longer, a fresh financial restructuring of the gas-based project has become "extremely critical".

This will require the shareholders - GAIL India, Petronet LNG and majority partner NTPC - to 'make some sacrifices'. Lenders, led by IDBI and Power Finance Corporation, will need to cut back on the interest till the plant runs to full capacity.

They will also have to adhere to their original commitment of absorbing cost over-runs, while the equity holders too would need to factor in lesser returns.

The group of ministers on Dabhol, headed by external affairs minister Pranab Mukherjee, at a meeting last month decided that a fresh restructuring proposal should be prepared "at least for the coming two years with a tariff cap of Rs 3 a unit".

The package has to be first prepared by RGPPL and will then be discussed by the ministers. No details of the package are available at the moment.

The current completion cost, estimated at Rs 870 crore (Rs 8.7 billion), will now exceed Rs 1,900 crore (Rs 19 billion), leading to over-runs of Rs 1,030 crore (Rs 10.3 billion). The lenders are, however, reluctant to fulfil the commitment, as accepted in the common term loan agreement.

As per the rate of $5.75 per MMTPU for LNG, approved by the GoM (translating into a tariff of Rs 2.87 a unit), the capacity charge works out to 93 paise. This charge will no longer hold.

The company's business model assumed revenues from regassification charges of 17 paise a unit. Now, that regassified LNG is being transported by the pipeline, the company will be deprived of this revenue, affecting its viability.

Another problem pertains to gas shortage. Of the required 2.1 MMTPA liquefied natural gas required for running the 2150 mw plant at 80 per cent plant load factor, only 1.2 MMTPA has been arranged till date.

Thus, only two of the three blocks, totalling about 1400 mw, will be operated, the remaining third block remaining idle.

As a consequence, the company will get only two-thirds of the total Rs 1,440 crore (Rs 14.4 billion) per year as capacity charge that it requires to service debts and to pay returns on equity at 14 per cent.

According to sources, Ratnagiri Gas is cash-strapped. Existing suppliers and contractors are threatening legal action, while lenders are not in a position to increase their debt owing to prudential norms.

Power Finance Corporation has refused to lend further money, till the power purchase and gas supply agreements are signed.