Mumbai:

The government's move is based on the recent decision of the state government to allow the Maharashtra State Electricity Board (MSEB) to draw power from DPC phase-1 at an optimum level of 83 per cent and tariff around Rs 2.80 per kwh on an interim basis.

Though the state government decision is subject to the approval by the Maharashtra State Electricity Regulatory Commission and the Bombay High Court, the central government has already initiated the groundwork to commence the power production in Dabhol, which is lying ideal for the past two years.

Sources close to the development say that the ministry of power is of the opinion that, at present, NTPC, which is operating various thermal plants in India and overseas, will be the ideal operator as the corporation has all internationally sophisticated technical know-how. Earlier, the government had considered NPTC as the maintenance contractor for the plant.

The sources add that the Rs 2.80-per-kwh tariff level takes into account the current cost of naphtha (after remission of all central- and state-level taxes) with the fuel cost being a pass-through item. For the proposed interim start of Dabhol phase-I, the tariff model is based on the recovery on the interest of debt at a reduced rate, without any provision of depreciation or debt repayment.

Financial institutional sources, however, maintain that the Dabhol power plant can be restarted only after at least six-to-nine months and hinges on the resolution of a number of micro-issues.

Representatives of the union and state governments, the MSEB, NTPC, the domestic lenders' consortium and the two US-based companies, General Electric (GE) and Bechtel, are meeting on a monthly basis to try and restart the plant.

"Efforts are under way to resolve the impasse. However, GE, Bechtel and NTPC will first have to undertake a joint study of the plant and arrive at precise measures for the restart of the plant. The study itself will take three-to-four weeks and then about five to eight months will be required to restart the plant," the sources say.

A number of issues such as various permissions will have to be obtained for a fresh power purchase agreement and which may have to be inked for power off-take from the first phase as the earlier agreement has been rescinded by MSEB.

GE and Bechtel are also keen on their earlier dues of about $140 million being settled. Besides, the support of the foreign lenders for restarting the power project is critical as they hold the veto power under the inter-creditors' agreement. The offshore lenders are insisting on a solution that includes both phases of the project and not a piecemeal solution as the counter guarantee is not valid for the second phase.

"Besides, the state government is keen on ensuring that the Dabhol project does not become an election issue next year. They feel that this could become a tool in the hands of the Opposition as there is a peak power shortage of about 2,000mw in the state," the sources sum up.