Maharashtra wants central concessions for cheaper Enron power

Wednesday, 18 September 2002, 07:00 Hrs
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MUMBAI: Maharashtra has reiterated its demand to the central government to forego taxes and duties in order to lower the price of electricity produced by Enron's beleaguered Dabhol Power Corporation (DPC).

Negotiations between the state government and financial institutions like IDBI have been deadlocked, with New Delhi yet to give any assurance on lowering taxes, officials here said.

Financial institutions and the federal power ministry are trying to persuade Maharashtra to reconsider its stand a fortnight after the state government decided not to buy electricity from the DPC.

Officials said that political leaders like Sharad Pawar are trying to get the state government to begin buying power from the American company's subsidiary.

Pawar's Nationalist Congress Party is a constituent of the Maharashtra's ruling Democratic Front.

But bureaucrats and officials of the Maharashtra State Electricity Board are reportedly pressing the state government to drive a hard bargain.

The electricity board rejected an offer by financial institutions that have lent money to the Dabhol project to price electricity at 2.75-2.86 per unit following a decision by the cabinet.

The board is bargaining for the power to be priced at Rs 2.25-Rs 2.50 per unit.

The state government's conditions include a reduction in interest payable to financial institutions by the DPC from 13.5 percent to 10 percent.

Maharashtra also wants the central government's permission for DPC to sell power to other states. Other demands include linking of the prices for naphtha to coal instead of crude oil.

The state government also expects the financial institutions to help delink DPC's liquefied natural gas terminal from the power plant so the plant can be used to earn revenue independently.

So far the state electricity board has refused to guarantee offtake from the DPC because it fears its own plants being shut down during periods of slack demand. The financial institutions are demanding a guaranteed purchase of 75 percent of the power generated by DPC.

The electricity board's own depreciated plants generate power at Rs 1.80 per unit.

Incidentally, Maharashtra faces a power shortfall of about 800 megawatts (MW) to 1,200 MW during peak periods. The state is expected to face power shortage from November onwards.

The Enron project went into limbo after the state electricity board, DPC's sole customer, declared its inability to pay for the power, saying it was too costly.

Source: IANS
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