Dabhol opponents call for new 'Business Model'

Vol 5, PW 1 (28 Feb 01) Midstream & Downstream
     

Amid the many presentations made to the Godbole committee by opponents of the Dabhol project is one by activist Pradyumna Kaul.

"Dabhol Power Company's business model has failed," he tells Petrowatch, " Let us accept it and restructure the company." Kaul attributes the failure to high capital cost, high internal rate of return and the high cost of petroleum-based fuels. His solution: restructure the capital structure of Dabhol Power Company by writing down shareholders equity by a factor of 10, writing off a part of the loans and introducing a moratorium on loan repayments.

"This is what is happening in India's steel industry, which has taken loans worth Rs 20,000cr ($4.4bn) and is now sick." Otherwise, warns Kaul, bankruptcy stares Maharashtra in the face. "Once Phase II is complete, Dabhol's annual bill to MSEB will be Rs 8,000cr ($1.76bn) at $28 a barrel.

Any bill in excess of Rs 2,000cr ($440m) a year will destroy MSEB because it can't pay." Kaul said even if National Thermal Power agreed to offtake some electricity generated by Dabhol, it would be unable to pay. "Dabhol power is in the same position as independent power producers in Thailand, Pakistan and other countries." Kaul is planning another case in the Bombay High Court, calling for the DPC power agreement to be scrapped.