Given the foreign equity, the tariff is based on the two-part formula as outlined by the power ministry. After the agreement expires, the power company can hand back the project to the irrigation department. The Rs 36-crore plant is being set up at the site where the state irrigation department was earlier operating the 10mw hydel project. It had, however, abandoned the project in 1994.

With the Centre permitting private companies to undertake rehabilitation of the exiting power plant over a year ago, the state hasnow given this project to the private sector through this route. The tripartite agreement was signed between MSEB, the state irrigation department and the American company.

It will also have to pay the state Rs 12.5 crore for the state's assets at the site. The power company also signed a separate land-lease agreement with Maharashtra. The project will be commissioned in 12 months after financial closure, said the official. Since the PPA has been signed, the company will now arrange to tie up funding for the project.

The state is considering inviting private companies to undertake the rehabilitation of other power plants, which are either not operating or are not able to run to full capacity. It may also opt for a joint venture to implement these projects.