Simultaneously, the state government has also agreed to look into the possibility of scrapping the revised power purchase agreement signed by the previous Shiv Sena-BJP government on December 9, 1998, with the Dabhol Power Company (DPC).

Talking to newspersons on the eve of the winter session of the state legislature, which starts on Monday at Nagpur, Chief Minister Vilasrao Deshmukh confirmed this and added that the project, which was envisaged to tackle the power shortage of the state, seemed to have defeated its purpose because of its prohibitive costs which the consumers may have to bear.

The constituents of the DF government, comprising the Peasants and Workers Party, Janata Dal (Secular) and the Communist Party of India (Marxist), have been pressing for the cancellation of the Dabhol project on the grounds that it would impose further financial burden on the ailing MSEB and ultimately on the state government, which is also reeling under severe financial crunch. These allies were of the view that the scrapping of the PPA will not be a major issue as such agreements with multinationals have been scrapped in Pakistan, Turkistan and Indonesia.

These allies were also upset over MSEB's purchase of power from the DPC at the rate of Rs 7.80 per unit (October bill) as against the agreed rate of Rs 2.40 per unit at the time of signing of the PPA. Such power purchase at an extraordinarily high cost, they said, was not needed as the improvement in the generation of MSEB's Koyana hydro power station and the Uran plant, in addition to the cut in the transmission and distribution losses, will meet the power requirement in the state.

Curiously, the MSEB had estimated the fixed capacity charge at Rs 1.82 per unit and the energy charge at Rs 2.72 per unit in July this year.

The MSEB had also projected that if it takes less units from the Dabhol phase-I, the capacity charge per unit would increase. Similarly, it had estimated that if the naphtha price in the world market goes down, the energy charge would fall thereafter. For phase-I and -II, the fixed capacity charge is linked with the dollar rate.

Top state government sources told The Financial Express on Sunday that this issue was discussed at a coordination committee meeting of constituents of the DF government on late Friday evening. The government, the sources said, was aware of the problem and was quite keen to ``save the state finances'' if possible by stopping the power purchase from the DPC and scrapping its PPA. Immediately after the Friday's meeting, an exploratory meeting was held by a senior minister to check ways by which the PPA can be cancelled. ``But a decision in this regard would only be possible after a series of consultations with allies, experts and other concerned personnel,'' a state minister said on condition of anonymity.

The issue is likely to come up for discussion during the state legislative session. The minister also pointed out that the government will also look into the possibility of filing a fresh affidavit in the Bombay High Court against the DPC showing the ``naked'' realities.

Enron Inc, it may be mentioned here, had scrapped the arbitration suit filed in a UK court against the MSEB on the condition that it would file an affidavit supporting the revised PPA, power purchase and the completion of the second phase of the 1,444-mw project and, above all, withdraw its writ petition against Enron in the Bombay High Court.

During 1999-2000, MSEB's purchase from the DPC was 3,870 million units at a per unit cost of Rs 4.12, involving Rs 1,595 crore. Its purchase from the state-run National Thermal Power Corporation was 9,257 MUs (Rs 1.41 per unit cost), involving Rs 1,304 crore, while from the Nuclear Power Corporation the MSEB purchased 1,868 MUs (Rs 1.82 per unit cost), involving Rs 340 crore.

Ironically, from January this year, MSEB's payments to the DPC have been delayed by about a month in view of ``precarious'' financial conditions. During the four months since April 2000, letters of credit were invoked on five occasions by the NTPC and the Western Coalfields Limited.

During 2000-01, the Maharashtra Electricity Regulatory Commission (MERC), in MU terms, allowed an increase in power purchase by the MSEB from the DPC and the central sector from 59,140 MUs to 59,240 MUs; while in rupees, it was slashed at Rs 3,387 crore from the proposed Rs 3,540 crore by the MSEB.

The MSEB had anticipated a net drawal of 4,200 MUs from the DPC as against MERC's approved purchase of 3,044 MUs from the DPC during 2000-01. The MERC, in its tafiff order, had said that the MSEB can draw in excess of the approved amounts from any of the stations, including Dabhol, ``provided the average realisation for sales is higher than the variable cost of the drawn power.''