"Assuming 100 per cent realisation from the sale of this energy, because of its high cost, the MSEB will be put to a loss of Rs 442 crore per month which will have to be borne by the state," the CM's secretariat said in an exhaustive note on the Dabhol project sent to the Congress president's secretary - V George. According to the CM's secretariat, when the phase-II block B (722 mw) is commissioned in June, total capacity will increase to 1,450 mw and the MSEB could purchase 940 million units per month from June to September. The fixed capacity charge payable would be Rs 190.4 crore per month.

When phase-II block C (again of 722 mw) is commissioned by the year-end, total capacity will be pegged at 2,184 mw and the MSEB can purchase 1,415 million units from October to December this year with a fixed capacity charge of Rs 230 crore per month.

The CM's secretariat has further said that when the entire project would be operated on liquified natural gas (LNG) from January 2002, the fixed capacity charge will be Rs 230 crore per month and in addition to this, there will be an additional LNG terminal fixed charge of Rs 53 crore, and an LNG take-or-pay payment of Rs 195 crore per month. "Thus, the total fixed charge payable will be Rs 478 crore per month," it added.

The CM's secretariat has said that in order to avoid the take-or-pay liability of LNG, the MSEB would be required to purchase 14,732 million units yearly. However, it says, "as per the energy demand scenario in 2001-02, about 1,665 million units and in 2002-03, as many as 9,327 million units energy would remain surplus. These would be available during off peak hours," it concludes. According to the CM's secretariat, during peak hours, the demand is expected to be more than the availability and hence all generation would be needed during that time. "However, the surplus power which is available during off- peak hour is required to be sold outside Maharashtra state," it added. Furthermore, the CM's secretariat has also admitted that the phase-I tariff is higher as Dabhol-generated power is used to meet peak-hour requirement. According to the CM's secretariat, if the power station is generating only during peak-hours, the cost of generation would be higher for the reason that the total investment and the returnon the investment is distributed over a small quantity of power generated.

Comparing the Dabhol project with the Rs 1,200 crore Koyana hydro-project stage-IV, the CM's secretariat said that the the power station is designed to be used for peak hours only due to the availability of a limited quantity of water. "The burden of this would be about Rs 230 crore for the first year without any additional unit generation which is the cost of having peaking power," it added. Similarly, as per the merit order despatch fixed by the Maharashtra Electricity Regulatory Commission (MERC), the generation from Dabhol Power Company (DPC) comes last following its higher energy cost.

"Since the units to be purchased from DPC is 53 per cent as against 90 per cent and the capacity charge payable is fixed, per unit cost of purchase would be higher," the CM secretariat said.

According to the CM's secretariat, the total project's capital cost for the purpose of tariff calculation is calculated at $2,501.2 million comprising $919.8 million for phase-I and $1,581.4 million for phase-II. This cost would remain firm and not vary even if there is an increase in actual capital cost except cost due to a change in law. "The increase in the cost of phase-II (1,444 mw) is due to a rise in the gas terminal cost and other power plant costs. However, this will not reflect in the tariff as per the power purchase agreement (PPA)," the secretariat said.