The Finance Ministry has stepped in to rescue the Dabhol Power Project, which is struggling to collect INR 400 crores dues from Maharashtra's power utility. The Ministry is expected to deduct the amount from central funds to be transferred to the state in case the dispute is not resolved amicably.
The project, which was built by Enron Corp, has been in trouble since last year, when dwindling gas supply from Reliance Industries KG-D6 block forced it to shut down.
It owes INR 8,500 crores to lenders and is struggling to keep afloat. It is controlled by Gail India and NTPC, which have 32.86% apiece while Maharashtra Government owns 17.41% and its lenders together own 16.87%.
The company had billed INR 400 crore to the utility last year, but this has been challenged by the customer. The matter is now before the appellate authority. The central government asked Maharashtra State Electricity Distribution Company to urgently clear its dues because of the poor financial condition of the supplier.
It urgently needs about INR 630 crore to service its debt and avoid asset downgrade.
The project can use costly, imported liquefied natural gas (LNG), but the state's utility was not ready to buy the expensive electricity so produced. To service its debt, the plant needs to operate at 68% capacity that requires 6.5 mmscmd of gas.
The Finance Ministry has reminded the state utility about the power purchase agreement that authorizes the Centre to deduct the default amount from the central government's fund transfers to the state as a payment security. However, this would be the last resort and hoped for an amicable solution.
Maharashtra Government officials offered to make payment of bare minimum required under the state's power purchase agreement if RGPPL did not pursue its full claim of INR 400 crore. The Centre advised both sides to agree on a minimum amount to service the debt and meet its maintenance expenses.
The state utility has claimed that RGPPL's invoices are unfair and it had already paid INR 127 crore towards the fuel cost for power supply and no fixed costs were due as the power supplier declared available capacity of 300-600 MW against installed capacity of 1,967 MW.