The Union power ministry has urged the petroleum ministry to allocate the 3.980 mmscmd of gas to be added to the domestic pool in 2014-15 for use by Ratnagiri Gas and Power (RGPPL), formerly the Dabhol Power Company. The idea is to prevent the entity from defaulting on its debt servicing obligations. Lenders’ exposure to the project stands at R8,500 crore, and unless it is made to run and generate revenue, the loans could turn bad.

In addition, the power ministry is learnt to have got a favourable opinion from the Solictor General of India ? Maharashtra’s state discom, MSEDCL, is bound to pay fixed charges to RGPPL, as ordered by the central electricity regulatory commission. Armed with the SG?s favourable opinion, the power ministry has now suggested that if the discom fails to pay up the estimated dues of R1,112 crore, the Centre could explore the option of paying the same and setting it off against central transfers to the state.

Sources said the power ministry had in a Cabinet note suggested gas supply to the power plant by according it the same priority as fertiliser units and making fuel provisions from an alternate source. But with the Cabinet unlikely to take a call over the proposal, and in the wake of the code of conduct, it wants the petroleum ministry to address the more pressing issue of fuel for RGPPL with a sense of urgency.

In the absence of the required fuel support, all operations at the 1,967.08 MW RGPPL plant in Maharashtra came to a standstill on August 1, 2013. The project is just getting 0.9 mmscmd of gas against its requirement of 8.5 mmscmd, which is not even sufficient to operate one turbine. Moreover, MSEDCL, one of the promoters of the project and a prime buyer of power, has not paid RGPPL charges for capacity declared on R-LNG, putting the entity under severe financial stress.

Though gas allocation is decided by an empowered group of ministers (EGoM), the power ministry?s fresh proposal may require just the approval of the oil and gas ministries. Faced with low production from RIL’s KG D6 block, the EGoM at its meeting on March 28 last year approved priority gas allocation (along with the fertiliser sector) to RGPPL and, later, on August 23 decided to reserve for the power sector in 2014-15 and 2015-16 all additional gas flows after meeting the 31.5 mmscmd need of the fertiliser sector.

The severe financial stress being faced by RGPPL was also highlighted by ICICI Bank CEO and managing director Chanda Kochhar in a letter to power minister Jyotiraditya Scindia last year. ?Immediate supply of at least 2.5-3.0 mmscmd to RGPPL from APM sources as an interim measure is needed in order to bring parity with other gas-based power plants, which are currently operating at 25-30% PLF. This would ensure that company is able to meet its debt service obligations without default,? she wrote.

RGPPL requires a minimum of 6.5 mmscmd for satisfactory debt servicing and operating at 68% PLF. The total requirement of gas for RGPPL is 8.5 mmscmd.

RGPPL has a total capacity of 1,967.08 MW consisting of three power blocks. The entire power block was available for commercial operations from May 19, 2009. The project was envisaged to operate fully on domestic gas from Reliance Industries? KG-D6 block (7.6 mmscmd) and ONGC?s marginal blocks (0.9 mmscmd). Supplies from these sources stopped on March 1 and March 4, 2013, respectively.