It is more than two years since MRL first announced its diversification into the power sector. The project originally envisaged to produce 500 mw was scaled down to 300 mw owing to cash constraints and also because of the refusal by the Government for use of naphtha as a fuel.

MRL thus began to look for alternative fuel and decided to set up the project at Manali near its refinery based on heavy fuel oil available with the refinery. It tied up with American power major PSEG Global and Larsen & Toubro as joint venture partners for the power project.

However political uncertainties have delayed the project and according to a top MRL source the power project may take at least another five years before it gets commissioned.

Meanwhile, MRL has commissioned EIL & FosterWheelers to do a feasibility study of the project which will have equity of 27 per cent and debt of 73 per cent. The source said MRL will hold 26 per cent of the equity and joint venture partners PSEG & LT another 26 per cent. The balance 48 per cent of equity will be offered to financial institutions and to the public.

But the financial structuring will be done only after the feasibility study is completed. MRL will also have to go to the Central Electricity Authority for clearance of the project and this too will take time, it is said.

The project is estimated to cost around Rs 1,200 crore. The entire power generated is to be sold to the Tamil Nadu Electricity Board (TNEB) for taking it into the state grid. But the source said although there is an in principle agreement between MRL and TNEB on the purchase of power, details of the tariff at which the power will be sold have to be worked out. But this stage can come about only after getting CEA clearance and tying up finances for the project which wouldhave a foreign exchange debt component also, it is said. Meanwhile, MRL is hoping that the political uncertainty will end and the ministry of power moves fast to give the required clearances for the project.