Yes, its Dabhol again!

Updated: Nov 24 2005, 05:32am hrs
The much-toted government-aided settlement of the beleaguered Dabhol (now Ratnagiri) power project has quite literally run out of gas! The settlement meant haircuts all around as part of an exit price paid to foreign lenders and equity holders. However, the weakest link in the settlement, fuel for the project, is threatening to jeopardise it. Gail, which is responsible for sourcing gas, has all along talked of assured supply with indicative prices to boot! However, current estimates are close to twice the original onespushing up the power cost by over a rupee per unit! So, Maharashtra can forget power at the original estimate of Rs 2.30 per unit.

The Dabhol experience shows that the government hasnt learnt its lessonnegotiated deals with the private or public sector are a bad practice. Here is a world class project supplying power in a power-deficit land. Then why hand it over to Gail and NTPC, without setting terms on the production cost After all, without this there is no incentive for Gail to beat down the gas price since fuel is a pass through cost for the Maharashtra distribution utilities. Government, after having unshackled the project of the various liabilities should have bid out the project on a tariff basis. If not this, at least let competition prevail in the PSU fold Petronet LNG Ltd, the only LNG supplier in the country could have been asked to provide a quote.

The settlement also goes to show that while Maharashtra is attempting to safeguard the interests of its consumers, by passing a Cabinet resolution that it will buy power for no more than Rs 2.30 per unit, the Centre is not safeguarding tax payers interests. The Dabhol problem was created by Maharashtra, and now the state is not only seeking a bail out, it is seeking a generous one that will ensure cheap power. Because as things stand, chances are Dabhol will fire on expensive gas and produce power well into the Rs 3 per unit band. Will this mean another round of hair cuts for the various stakeholders or will Maharashtra bite the bullet Both ways, the consumer is at the receiving end. Surely, the government could have done better.