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Monday
Mar 12 2001
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0016 hrs IST
1346 EST
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Time running out to resolve Dabhol issue
Bodhisatva Ganguli
MUMBAI
THE MAHARASHTRA government's decision to grant a one-month extension to the Madhav Godbole committee which is reviewing the Enron-promoted Dabhol power project, leaves very little time to find alternative buyers for the additional power which the Dabhol plant will soon be generating from the second phase of its project.
Any solution to the imbroglio has to be in place latest by August this year by which time the entire second phase of the project will become capable of generating power.
In June this year an additional 722 mw of power will go on stream, and by August a further 722 mw will become operational, taking the plant's total capacity to 2,100 MW.
When that happens, the state would have to pay fixed charges of around Rs 425 crore, according to DPC's estimates. Since the MSEB's monthly revenues are in the region of only Rs 800 crore it will almost find it impossible to pay this amount.
DPC officials say that it is possible that they might consider delaying generating power from phase 2 in view of MSEB's poor financial health.
They however, say that they would contemplate this only if the framework of an agreement is in place with regard to finding alternative buyers for the power generated by DPC.
In the absence of progress towards such an agreement, the old power purchase agreement, in which MSEB is the sole buyer, would remain in place, say DPC officials.
DPC's problems will also multiply once phase 2 is on stream. Its counter-guarantee applies to payments for one third of the power generated, which it can keep on invoking.
The remainder is protected by an escrow account which, however, is yet to be put in place, and a state government guarantee. Given the strained relationship between the state government and Enron it is unclear if the escrow will be established at all and the state government in the past, has been reluctant to honour its guarantee.
Given this volatile cocktail, the two sides could end up in arbitration sooner rather than later, unless alternative arrangements are in place.
The trouble is that there is hardly any time to change the power purchase agreement, before phase 2 become operational. A widely discussed proposal is for Enron to reach an agreement with the central government owned power trading corporation, which will sell to various states.
However, this would involve complex changes in the PPA which might take a long time to bring about. Negotiations involving a mega power project promoted by Reliance Industries, located in Hirma in Orissa, has been going on for years.
The prospects of successfully concluding negotiations with a number of states before August 2001 would thus seem to be bleak.
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