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Home News Power Sector News Power ministry seeks gas for Dabhol

Power ministry seeks gas for Dabhol

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DabholThe Dabhol power plant, the Centre's most prestigious business rescue mission, has been languishing for almost nine months now. But it took ICICI Bank MD Chanda Kochhar's warning to shake the power and oil ministries out of their stupor. As media first reported on October 7, Kochhar wrote to power minister Jyotiraditya Scindia to warn that Rs 8,500-crore loan to the Dabhol project could turn sour for lenders as the plant was running at merely 3% of its capacity and unable to pay installments.

After Kochhar's letter, the power ministry asked the oil ministry to give the Dabhol project top priority at par with fertilizer sector and allot gas from new sources available in 2013-14. The power ministry has sought more than a million cubic metres a day (mcmd).

In its communication to the oil ministry, the power ministry has admitted that Dabhol's entire 1,967MW capacity has been stranded in the absence of domestic gas supply. The project is also unable to recover its fixed costs by running the plants on costlier imported fuel since this pushes up the price of electricity which consumers are unwilling to buy.

Dabhol was created after taking over Enron's mothballed plants and an adjacent gas shipping port after the US energy major went bust in 2001. It is now owned by Ratnagiri Gas and Power Projects Ltd, a joint venture of state-run gas utility GAIL and power generation major NTPC.

The project has to run at a minimum 85% capacity to be able to pay installments. This requires about 6.5 mcmd of gas. But the supply to the plant dwindled to 0.6 mcmd, or 7% of its allocation, before coming to a grinding halt from March 1 after the government refused to give power sector equal priority with fertilizer industry in allocation of domestic gas.

Industry sources said it was important to keep Dabhol spinning since any default by the project would have a severe impact on the banking industry and make a dent deeper than the outstanding loan.

Lenders already sacrificed about Rs 2,500 crore at the time of asset takeover and also addressed the need for Rs 1,220 crore as completion cost at the time of restructuring in 2009.

Dabhol's case is a pointer to the crisis gripping the gas-fired power industry. LNG, or gas imported in ships, cannot be used as an alternative since it costs nearly three times that of domestic fuel and pushes up power tariffs. State utilities refuse to buy power at higher tariffs for fear of evoking public ire. As a result, most of the old gas-fired plants aggregating over 18,000MW capacity are running at less than 30% of their capacity.

The power ministry reckons Rs 40,000 crore invested in new gas-fired power plants with an installed capacity of 4,904MW are at risk of turning into non-performing assets (NPAs) due to non-availability of domestic gas, primarily due to low production from the Reliance-operated Andhra offshore field. These plants were set up after Reliance projected a production of 80 mcmd of gas. The plants have been rendered idle as production has fallen to 10 mcmd after briefly hitting a peak of about 69 mcmd in March, 2010.

Source- TOI

 

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