With this, the financial closure for the Rs 1,411 crore Reliance power project will be possible by August, the company sources told The Financial Express while welcoming the state cabinet's decision.

Reliance has been demanding that the naphtha-based power project would not be viable if tariff was calculated on the gross capacity of 447 mw and not net capacity of 410 mw. The configuration of the turbines amounting to 447 mw was required to maintain constant supply of 410 mw and Reliance's net installed capacity would be 410 mw, making the allowance of 3 per cent for use of the power for auxiliary consumption under the project itself. The company will have to constantly supply power of 398 mw under varying circumstances andsituations.

Maharashtra State Electricity Board (MSEB) which had also shared Reliance views had said that though the gross installed capacity was higher (447 mw), the net installed capacity can be arrived at by carrying out actual capacity test at the site subject to rigorous conditions which should determine the capacity to be considered for tariff calculation.

Chief minister Narayan Rane told reporters that according to the original power purchase agreement (PPA), the power generation capacity was 410 mw with the tariff fixed at Rs 1.55 per unit. However, Reliance had suggested to the CEA that their project could generate 447 mw of electricity and the tariff be considered accordingly.

"This was agreed by the CEA and today the cabinet approved it," he added. With this revision, the tariff will be about seven to eight paise less taking into consideration the various benefits being given to the project by the state government.

Rane said that Patalganga is the first project in the state throughcompetitive bidding and the work on the project is yet to start as the process of revising the power generation capacity was going on for the past four to five months.

The government has allowed sale of power to the third party by Reliance in case the MSEB fails to make payment to the company for the purchase of power within the notice period of 30 days. Reliance will be entitled to sell power to high tension consumers or nay other creditworthy consumers acceptable to the company or its lenders within Maharashtra or outside. Reliance may identify third party consumers and the revenue collected from such consumers after deducting all expenses be at least equal to the revenues required as per power purchase agreement.

MSEB will have no objection to such sales and will use all reasonable endavours to facilitate Reliance's arrangements with such third party consumers in order to give full effect to the spirit and intent of reliance's agreements with such consumers.