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Dabhol project revival depends on Centre’s help

Despite fall in gas prices to $ 10 per million British thermal unit, the revival of now closed 1,967 MW Dabhol power project run by the Ratnagiri Gas & Power Pvt Ltd (RGPPL) is expected to take more time. This is due to the delay on part of the high powered committee appointed by the Centre to take a decision on gas pooling, reduction in certain taxes and providing per unit subsidy.

Even though the power will be available at around Rs 4 per unit, RGPPL will have to take the Maharashtra State Electricity Distribution Company (MahaVitaran) on board as the gas will be sourced other than KG D6. MahaVitaran  has power purchase agreement (PPA) with RGPPL as it draws about 95% of the power from the Dabhol project which has been closed since December 28 last year for want of gas.

Besides, RGPPL needs to convince MahaVitaran on project lenders’ proposal to convert debt into equity equivalent for interest dues worth Rs 405 crore. MahaVitaran is opposed to any such proposal. MahaVitaran  has argued that it was against the equity sale at par at Rs 10 though it enjoys the first right of purchase. RGGPL board is expected to give its approval for the conversion of loan into equity at its meeting slated this week.

As of now, the RGPPL’s equity is worth Rs 2,965 crore. The equity holders include NTPC (32.86 per cent), GAIL India (32.86 per cent), consoritum of IDBI Bank, ICICI Bank,SBI and Canara Bank (16.87 per cent) and MSEB Holding Company (17.4 per cent). With the conversion of debt into equity equivalent to interest dues of Rs 405 crore, the equity would increase to Rs 3,370 crore.

Of the total debt of Rs 8,500 crore, RGPPL had so far repaid Rs 4,000 crore to the  project lenders since the project was revived in April 2006.

A senior state government official, who has been in constant touch with the Centre for the restoration of Dabhol project while protecting the MahaVitaran’s financial interests, told Business Standard ”A high powered committee comprising secretaries of the finance, power and petroleum ministries is currently looking at a slew of measures for the revival of gas based power projects across the country including Dabhol project. The committee is exploring various options including gas pooling, cut in some taxes and per unit subsidy. However, till the government acts based on the high power committee’s report, the revival of Dabhol project is not possible soon.”

RGPPL official admitted that there has been no assurance on gas supply from the Centre. However, he admitted that falling gas prices is highly positive.

He informed that the conversion of debt into equity equivalent for interest dues worth Rs 405 crore is being discussed at the forthcoming board meeting. ”This will avoid conversion of Dabhol project into non performing asset (NPA) by lenders for moment. But the real solution is restoration of gas supply for the project to run and revive RGPPL’s finances,” he noted.

However, Maharashtra government official said ”The state government and MahaVitaran are strongly opposed to the conversion of debt into equity. It is like my sorrow becoming your happiness. Even though MahaVitaran has first right of purchase but the price will be decided by RGPPL and it is not acceptable. It is now sold at Rs 10 at par but during purchase if RGPPL increases it to Rs 12, 13 or 14 it not acceptable to MahaVitaran.” The official said that MSEB Holding Company may be short changed since the value of its holding is diluted and lenders would get the benefit when RGPPL’s financial health improves.

The official said it is quite easy to sell equity but selling asset is difficult task. When the restructuring of the Dabhol project took place in 2006, MSEB Holding Company had received equity at premium to the face value.

On Monday, the Maharashtra chief minister Devendra Fadnavis told the legislature that the government hopes an early revival due to the falling gas prices and the power will be available at around Rs 4 per unit. He pushed the ball in the Centre’s court for an early revival as the power procurement from the Dabhol project will help tide over the rising power demand in Maharashtra.

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