Simultaneously, the state energy department, in a detailed note prepared for the state cabinet, has also asked the MSEB, which holds 30 per cent equity in the DPC for phase-I, to try, with the help of other equity partners, to "convince the project's lenders so as to get relief in the payment of monthly bills."

According to the department, the government has already approached the Centre "with a request to absorb excess power from phase-I and II in national grid in a serious bid to mitigate the risk of purchase of all of power from phase-II (1,444 mw)." The state energy department further admitted that since prolonged negotiations were held for the finalisation of the power purchase agreement (PPA) with the help of international legal and financial consultants and "as such, the MSEB is entirely responsible for phase-I."

The state energy department's directives to the MSEB are significant because the state government has already set up an energy review committee headed by former Union home minister Madhav Godbole to review the power purchase agreement (PPA) signed between the MSEB and the DPC and study the demand and supply for power in the state. The department's diktat is also crucial as the MSEB has yet to pay the power purchase bills for December (Rs 152 crore) and January (Rs 127 crore) to the DPC.

Moreover, the energy department's views are also important against the backdrop of the MSEB's recent admission that "projections about absorption of power from phase-II have gone haywire and it cannot consume the entire power from phase-II."

The state energy department has shared the MSEB's views and has said that the MSEB's monthly outgo towards payment of DPC's bills will rise to Rs 500 crore after the commissioning of the first block of 720 mw of phase-II in June this year. The bill would further rise to Rs 650 crore from October 2001.

At present, MSEB's monthly collections are between Rs 800 crore and Rs 850 crore. "The above level of payment, even in the best scenario, would be beyond the capacity of the MSEB," the energy department said.

In view of such a "precarious" financial situation, the MSEB would find it extremely difficult to buy power from phase-II since "nine out of 10 customers of the MSEB are subsidised." In addition to this, the growth in the industrial and commercial sectors has not been "of the expected levels - in fact it has witnessed negative growth."

According to the state energy department, without such a demand and with such heavy payments, "It would become necessary to bail out the MSEB from any contractual liability for Dabhol phase-II."

Furthermore, the energy department has admitted that the MSEB has been defaulting on the timely payment of its monthly bills since January 2000 as its revenue realisation is in the order of Rs 800 crore against expenses of Rs 1,100 crore per month. Offtake from the DPC has been restricted to 30-35 per cent only due to MSEB's liquidity problems.

"The DPC tariff has remained high due to the rupee-dollar exchange rate, high naphtha prices and low offtake," the department said and added that there has been an increase of 9 per cent in the rupee-dollar rate and 105 per cent in naphtha prices during May 1999 and October 2000.

On 90 per cent dispatch, DPC's average tariff during this period has been Rs 4.02 per unit, on actual dispatch it has been Rs 4.94 per unit. "Actual tariff in October 2000 on 60 per cent plant load factor is Rs 6.91 per kWh," the department said.