Godbole panel seeks Dabhol project restructuring to cut per unit tariff

Sanjay Jog

Mumbai, Aug 31: The Mahdav Godbole renegotiations committee has strongly called for the complete restructuring of the 2,184 mw Dabhol project with an objective to drastically cut the per unit tariff from an average Rs 8.08 to Rs 2.40.

As reported by The Financial Express on August 18, the committee, which submitted its interim report to the state government on Friday in the wake of Enron’s decision to pull out of the Dabhol project, has suggested that all equity holders will have to take a hit and the discounting of equity would have to be as much as 75 per cent. The US multinational, Enron holds 50 per cent, GE and Bechtel hold 10 per cent each and Maharashtra State Electricity Board (MSEB) -30 per cent in Dabhol phase-I. In the phase-II, MSEB has not picked up equity on account of its poor financial conditions while Enron has increased its stakes at 65 per cent in addition to 10 per cent each held by GE and Bechtel.

The committee has suggested that in the event of discounting of equity, the private party or the state-run National Thermal Power Corporation (NTPC) should pick up 75 per cent stakes while the MSEB can hold up to 25 per cent equity. Interestingly, MSEB has been insisting upon the confiscation of equity by all stakeholders. However, the committee has not accepted MSEB’s suggestion but called for discounting of equity in the Dabhol Power Company (DPC).

Maharashtra minister for energy, Dr Padmasinh Patil told this paper that the committee has unanimously stressed the need for decrease in the per unit tariff at Rs 2.40. "The government will take the necessary decision on the recommendations of the Godbole committee," he added.

Dr Godbole said that the committee has indicated the guidelines on which the renegotiations can be conducted with the new buyer. "We have suggested a number of steps with regard to financial restructuring. However, the bottomline should be the reduced tariff which according to the committee should be around Rs 2.40 for creating the demand of Dabhol project," he added.

The committee has suggested that the Centre should provide a 15 year interest-free loan of Rs 2,500 crore to the Maharashtra government in order to convert the dollar debt into rupee debt.
Moreover, the entire loan of $1.2 billion should be restructured and the interest rate be brought down further at around 12 per cent from the existing 16.5 per cent. According to the Godbole committee, the part of loan should be converted into preference capital.

The committee comprising former union energy secretary EAS Sarma, former union secretary for chemicals Anil Gokak, HDFC chairman Deepak Parekh, MSEB chairman Vinay Bansal, state principal secretary for energy VM Lal, state treasury and accounts secretary SK Shrivastav, has recommended that the liquified natural gas facility (LNG) should be delinked from the Dabhol power project. The committee has suggested that the LNG facility should be taken over by the state-run Gas Authority of India Limited (Gail).

The committee has cited that the Enron’s offer of reducing the tariff by mere 53 paise was not workable especially when the company wanted the power purchaser to purchase at 90 per cent plant load factor on a continuous basis. The committee was of the view that the company had not taken into account the cost overrun on completion of Dabhol phase-II following the suspension of power purchase by MSEB from phase-I and also suspension of construction by construction contractors.

The committee said that it held discussions with the possible buyers comprising Punjab, Madhya Pradesh and Delhi. However, they had declined to purchase power at 90 per cent plant load factor at base load factor as they wanted either during peak period or during certain seasons. Similar exercise for identification of buyers for Dabhol power was carried out by the Central Electricity Authority.