Maharashtra canآ’t afford Dabhol naphtha-based power

Vol 10, PW 9 (24 Aug 06) Midstream & Downstream

Maharashtra has made clear that it cannot afford to buy any electricity generated by Dabhol from fresh purchases of naphtha.

This runs counter to a decision taken on 28th July at the Dabhol review meeting called at Delhi by power secretary RV Shahi. This meeting decided that, till the (Dabhol) plant becomes fully operational after the LNG/gas is available by March 2007, Maharashtra State Electricity Distribution Company would be required to fully meet the cost of generation using naphtha as fuel.

Further, any subsidy which needs to be capitalised could be discussed between MSEDCL, Ratnagiri Gas and the financial institutions and a mutually acceptable arrangement should be worked out. A senior Maharashtra official says it is unsustainable for the state to purchase Dabhol power if it is produced from fresh purchases of naphtha.

Till now Dabhol is producing power from old naphtha stocks (left over from the Enron days) and weve bought power from them at Rs4.25 per KwH, we are told. And we sell this power at Rs3.27 per KwH.

We manage this (loss) by juggling with the fuel adjustment cost. Continues our source: But given the current prices of naphtha, power cannot be produced for less than Rs6.50 per KwH.

It will be difficult for us to bear such a big margin. Maharashtra says it can stretch itself to paying a maximum Rs5.25 or Rs5.50 per KwH for Dabhol power, because this is what we pay when we buy power from other states but not beyond that.

Critics argue that even the present power purchase price from Dabhol has yet to be approved by the state electricity regulator. More, Dabhols lenders are unwilling to subsidise the project for much longer.

Lenders have written off about 50% of what was due to them, says a source. How long can they keep on pouring in money The only way out, it seems, is to run Dabhol on LNG.

Enron was on the point of starting the LNG terminal (in November 2001) before the power station was shut down (on 29th May 2001) we hear. This means not much work remained.

We dont understand why it is taking Ratnagiri Gas so long. It is already more than a year since they took over Dabhol.