Under the terms of the project, the state government, through its ownagencies, was supposed to pick up a total of 30 per cent equity in thesecond phase of the mega power project.

Highly-placed state government sources told The Financial Express onThursday that while there is an option before it to pick up the equity afterthe commissioning of the second phase of the 2,184-MW, Rs 10,500 croreDabhol power project, the government is now looking at the option of gettingin FIs like IDBI, ICICI and IFCI to purchase at least half the total stakeon its behalf immediately.

``There is no denying the fact that we are faced with a financial crunch. Toadd to it are the huge losses the Maharashtra State Electricity Board (MSEB)has incurred in 1999-2000. We have left with few options,'' the sourcessaid. ``But we will have to secure the permission of the majoritystakeholder, in this case Enron, ex-ante, and similar permissions from thelenders.''

Assuming that the 15 per cent is picked up by FIs, the remaining 15 per centcan be picked up after the commissioning of the second phase, the sourcessaid. The first phase of the project, involving 740 MW, has been held inequity terms by Enron (50 per cent), 10 per cent each by GE and Bechtel andthe remaining 30 per cent by the Maharashtra Power Development CorporationLtd (MPDCL), a special purpose vehicle floated by the MSEB only for theDabhol project.

For this 30 per cent of the first phase, the MPDCL had to cough up a heftyRs 750 crore by way of its equity contribution. According to the terms ofsetting up the SPV, the funds are to be treated as a loan from the MSEB tothe MPDCL. Even as the cash-strapped state government explores options forits 15 per cent stake now, US-based Enron is exploring its own possibilityof increasing the stake in the second phase from 50 per cent to 65 per cent,in case the state government fails to pick up its share of the stake at thisjuncture. Enron is also in a hurry on this, since lenders to the project areputting pressure on it to consolidate the balance-sheet by December 2000,since at this point this balance 30 per cent equity is being treated as adebt in the books of DPC.

Enron is also looking at floating a global tender for a strategic partnerwho would pick up the additional 15 per cent equity, in case the stategovernment failed to chip in. Top DPC sources, however, have said thecompany and Enron were studying all possibilities with a view to finalisingthe equity structure for the second phase of the mega power project at theearliest. ``We have to see all this in the context of the provisionsincluded in the revised power purchase agreement.''

State blames DPC for MSEB cash crunch
Maharashtra Energy Minister Dr Padmasinh Patil on Thursday admitted that thehigh cost of power purchase from Dabhol Power Company (DPC) and foreignexchange liability have further worsened the already-ailing MaharashtraState Electricity Board (MSEB).

``Due to the soaring prices of naphtha in the world market, the cost ofpower has gone up, and the MSEB is finding it difficult to purchase theentire power from DPC's first phase of the 740-MW project,'' Dr Patil saidat a conference called `Powertech 2000' here.

Dr Patil also said the MSEB, which is reeling under heavy financial crisis,is not in a position to achieve a 4.5 per cent rate of return on its netfixed asset as stipulated by the World Bank and other financialinstitutions. These insitutions, he added, are not coming forward to supportthe MSEB in view of the arrears of nearly Rs 5,000 crore, 31.5 per cent oftransmission and distribution losses and poor revenue collection.

``Had there been a higher collection efficiency and a drastic cut intransmission and distribution losses, the MSEB would not have reached tothis pathetic situation,'' Dr Patil said. ``Private investors too do notcome forward in view of the present sorry state of the power sector.''

Dr Patil said the state government will table the Maharashtra ElectricityReforms Bills in the ensuing state assembly session in November at Nagpur.The Bill envisages MSEB's unbundling through the formation of three separatecompanies for generation, transmission and distribution.

``The power development will take place in coordination with the stategovernment and the Maharashtra Electricity Regulatory Commission. Thedistribution company will work as a licensee which will be responsible forproviding adequate and quality power to consumers and will collect adequaterevenue,'' Dr Patil said. ``The improvement in the distribution system willbe made mandatory by enforcing responsibility and accountability.''

Dr Patil said the state has planned a capacity addition of 6,692 MW in thenext five to six years. ``A systems improvement programme, with aninvestment of around Rs 6,500 crore, has also been planned within a span ofthe forthcoming three years.''