The Dabhol saga continues, albeit under a different name: the Ratnagiri power project. The 2,150-mw project was revived in April last year after the settlement of GE, Bechtel and foreign lenders dues, and was supposed to be back on track. But thanks to GAIL Indias failure to assure long-term gas/LNG supplies of 2.2 million tonnes annually, it is lurching and sputtering again. Ratnagiri Gas & Power Private Limited (RGPPL), the company that took over the power plant in October 2005 and in which Gail holds a 28.3% stake, has been forced to resort to naphtha as a fuel, which is costlier than gas the fuel assumption that allowed Indian lenders to restructure its finances. RGPPL has an ad hoc tariff arrangement with the Maharashtra State Electricity Distribution Company for supplies at Rs 5.10 per unit up to March-end, 2007, enabled by a central waiver of customs duty on naptha imports. From April onwards, the power ministry has projected that RGPPL would have to operate two blocks of 740 mw each, keeping another block of 740 mw idle (for want of gas). On its part, Gail has lined up 1.2 million tonnes of gas for two years from Petronet LNG, to start once it turns the Dabhol-Dahej and Panvel-Dabhol pipelines operational (in April). But this is not enough, and the sole buyer refuses to pay higher rates. It has come a long way from the days it was paying Dabhol some Rs 8 per unit. Rate perceptions have been altered still further by the upcoming Sasan project, which intends to use pit-head coal to supply power at Rs 1.19 per unit.
So, what becomes of Ratnagiri The Centre has intervened to do some firefighting, since letting the project come apart again would highlight an old power sector muddle at a time that India is finally getting its act together on energy sufficiency. To save the project, perhaps Petronet could pool gas supplies and share the cost burden with others. This requires a broader plan. Indias long-term energy challenge is no easier. Gas-based power can prove very cheap, provided a pipeline network is built. And Indias proximity on the map to the huge South Pars reservoir is hard to ignore. But that, alas, is on paper.