Maharashtra government nod, financial sops to restart Dabhol power plant

Shut in 2013, gas-based power plant to start revival plan with 500 MW.

| Mumbai | Published: October 7, 2015 2:19:13 am

The Maharashtra government on Tuesday gave in-principle approval to restart the Dabhol power plant to start producing 500 megawatt from November 1, and supply electricity to the Indian Railways. The Union and state governments will offer financial sop for the revival of the stalled power project through subsidies for the first two years.

The 1,967 megawatt plant located at Anjanwel in Maharashtra’s Ratnagiri district has been dysfunctional since 2013. According to the revival plan, the Union and state governments will help the Ratnagiri Gas Power Project Limited (RGPPL), the company formed earlier to revive the plant, with financial support for the first two years to produce energy using regasified Liquified Natural Gas. RGPPL will now have a separate facility for Liquified Natural Gas.

A senior official from the state energy department said, “Subsidies don’t always work, but the idea now is to just kickstart an asset defunct for years.”

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According to the plan, RGPPL will supply power to the railways at Rs 4.70 per unit for the first two years, even as the actual power purchase cost would come to Rs 6.15 per unit. The remaining Rs 1.45 per unit is proposed to be bridged through support from the Union government’s Power System Development Fund.

State Energy Minister Chandrashekhar Bawankule said, “The proposal is also beneficial for the railways since the cost of energy for railways in Maharashtra is currently Rs 8.63 per unit. We will chalk out a detailed plan of implementation and present it to the cabinet for approval over the next three weeks.”

The power purchase agreement is, however, yet to be signed and pending approval at the Railway Board, a senior government official said.

To support the revival, the Maharashtra government will have to waive Value Added Tax (VAT) and octroi. Besides, the power regulator of Maharashtra will have to waive transmission utility charges. The waivers would amount to roughly Rs 350 crore for two years, Bawankule said, adding if the project continues to operate as per Union government guidelines, it will be possible to repay all debt by 2034. The project is running into a debt of Rs 7,774 crore.

The Dabhol project has been facing trouble ever since work started in 1992, with the initial developer Enron’s bankruptcy, change in source of fuel, and issues over power purchase price among other factors. The plant has been defunct since December 2013, due to financial constraints and want of gas. The Maharashtra State Electricity Distribution Company Ltd (MSEDCL) had terminated its power purchase agreement for the Dabhol plant, saying it could not afford to buy power at Rs 5.50 per unit as proposed by RGPPL.

The state-owned Maharashtra State Electricity Board has 13.5 percent stake in the 11,594-crore project. The National Thermal Power Corporation (NTPC) and Gas Authority of India Ltd (GAIL) are the main stakeholders.

The Maharashtra government and financial institutions such as IDBI Bank, State Bank of India, ICICI Bank and Canara Bank have equity stakes.

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