Sanjay Jog

Mumbai, June 14: The Maharashtra State Electricity Board (MSEB) has proposed to bargain hard with the Dabhol Power Company (DPC) for reduction in fuel cost by 50 to 60 cents per million British thermal unit (MMBTU) through a drastic cut in the prices of liquified natural gas (LNG), shipping cost and separation of regassification from the main Dabhol plant. The fuel cost is expected to decrease from $4.8 MMBTU to $4.2 MMBTU, which will ultimately help reduce the per unit tariff by DPC.

MSEB will press for reduction in the price of liquified natural gas by the DPC from $2.7 MMBTU fixed at $18 a barrel to around $2.67 MMBTU fixed at $10 a barrel.

MSEB sources told The Financial Express that Dabhol phase-II (1,444 mw) will require a total of 2.1 metric tonne of LNG annually. “The state-run Gas Authority of India Limited (Gail), which recently made a presentation to us, are of the view that the reduction in LNG prices at the above given level is possible. In fact, Gail has quoted these projections in view of the proposed Petronet project,” sources said.

MSEB sources said that this proposal will be taken up at the renegotiation with the DPC at the Madhav Godbole renegotiations committee meeting slated for June 29 and 30.

MSEB will also emphasise the need for a cut in the shipping cost by the DPC from the existing $98,000 per day to around $68,000 per day. At present, Enron along with Mitsui and Shipping Corporation of India have formed a joint venture company, Greenfield, for the supply of LNG to the Dabhol plant.

MSEB sources said that the cost of the regassification facility should be distributed over its entire capacity and not just over the amount sold to the power plant, as is currently the case. In fact, the Madhav Godbole energy review committee in its report submitted to the state government on April 10, made a strong recommendation in this regard and said that the LNG facility be separated into a distinct facility, whose capital costs are reflected in the fuel charges, not as take or pay, but only in proportion to the extent of fuel regassified for power generation, compared to the total regassification capacity.

Moreover, Crisil and Infrastructure Development Finance Corporation, which have been advisors to the Madhav Godbole renegotiations committee, have also suggested that the DPC should maintain the return on equity at 16 per cent, reduce its equity from the existing $1,000 million, restructure loan repayment schedule and increase moratorium.

Crisil and IDFC in a recent presentation before the MSEB and the Madhav Godbole committee, have made it clear that the proposed 10 per cent cut suggested by the DPC in per unit tariff will give a relief of 54 paise in actual terms.