RGPPL's plan to add 2,100 MW of additional capacity at its Dabhol power plant stuck as state unwilling to buy costly power

Ratnagiri Gas and Power Pvt. Ltd's (RGPPL) plan to add 2,100MW of additional capacity at its Dabhol power plant has come unstuck, with the Maharashtra government unwilling to pay more for the supply.

The expansion was estimated to cost '8,820 crore and RGPPL had proposed a 70% tariff hike.

Power from its existing 1,950MW plant is sold at '3.80 a unit, and its new proposed tariff is around '6.50 a unit on account of limited gas availability.

The project was originally planned with a generation capacity of 2,150MW, but was scaled down to 1,950MW because of problems with equipment. It achieved full load on 31 March, but is currently generating 1,300MW due to a planned shutdown.

"The expansion project is not going forward as no one is willing to buy power at that tariff. While we've already applied for gas to the Central Electricity Authority, we don't know when we'll get the allocation," said A.K. Ahuja, managing director of RGPPL. "Imported LNG (liquified natural gas) is expensive."

Ahuja said the firm's board has approved its feasibility report on the proposed expansion, but the Maharashtra government is not ready to sign a power purchase agreement (PPA). "They are not willing to buy power at more than '3.50 per unit."

Subrat Ratho, principal secretary (energy), Maharashtra, and managing director of Maharashtra State Electricity Board Holding Co. Ltd, did not respond to phone calls or a text message, and an email sent to his office.

Mint reported on 4 October about the proposed expansion. The overall investment for the project is estimated at '4.2 crore per MW.

State-run NTPC Ltd and GAIL (India) Ltd are the two main stakeholders in RGPPL, with each holding 29.65%. Others include the Maharashtra State Electricity Board, which owns 15%, and lender banks--IDBI Bank Ltd, State Bank of India, ICICI Bank Ltd and Canara Bank. This consortium bought the firm, previously named Dabhol Power Co., after its original promoter, US-based Enron Corp., collapsed in 2001.

"The trend for the last few months shows that the state electricity boards are not buying electricity aggressively at high rates because of their poor financials. The merchant power rates are also hovering around '3 per unit," said Rupesh Sankhe, an analyst at Angel Broking Ltd. "From the medium-term perspective...new competitive mechanism for long-term PPAs assures that the tariff will be very competitive."

The Dabhol project, which registered a loss of '600 crore in 2008-09, made a profit of '48 crore in the year to March and is expecting a profit of '600 crore this fiscal.

"On our equity base of '2,000 crore, we are expecting a return of '300 crore. We have also seen a saving in our fuel consumption," Ahuja said.

But some issues are yet to be resolved. While the utility aims to lease out its LNG terminal at Dabhol and earn around '150 crore a year in user charges, it is yet to operationalize plans as dredging, or deepening the harbour that is crucial for large ships carrying the fuel to dock at the facility, is yet to take place.

The terminal has an annual capacity of five million tonnes, but is not operational yet.

In addition, work to build a breakwater--offshore structures to break the intensity of waves-- so the firm can operate its terminal on the west coast throughout the year, is yet to start.