Maharashtra's Ratnagiri Gas Power Pvt Ltd at Dabhol may at last be able to go on full stream by October, as the union government has decided after months of deliberation to allow RGPPL to buy gas from Reliance Industries' Krishna-Godavari basin output.

A panel of ministers has approved the signing of a gas sales and purchase agreement (GSPA) between RGPPL and RIL. Under this, the Dabhol plant can buy 2.5 MMSCMD of gas a year.

The power plant, largely controlled by the government through its corporate entities NTPC and GAIL, has an installed capacity of about 2,150 MW. But currently, it generates just 600 MW from its two turbines due to several pending issues, including fuel shortage.

As per the agreement signed on Friday, RGPPL would buy the gas from Reliance at the government-approved well-head price of $4.2 per million metric British thermal units. It would also have to pay an additional $1 for transportation charges and taxes.

RGPPL supplies the entire power to the Maharashtra State Electricity Distribution Co Ltd for distribution across the state, except Mumbai. Under its ongoing expansion plans, the Dabhol unit will start generating 1,900 MW by November this year, and India's financial capital may receive some of the output. But for that, it will require a minimum 8.5 MMSCMD of gas.

The Ratnagari Gas board will sign two separate purchase agreements with Reliance Industries' gas transportation arm Reliance Gas Transportation Infrastructure and the Gas Authority of India Ltd.

It has been widely reported that the board of Ratnagiri Gas - which consists of nominees from the National Thermal Power Corporation and GAIL - had been divided over the cost of sourcing the gas from Reliance Industries.

Earlier, the union government had allocated a mere 2.7 million metric cubic meters per day (MMCMD) till September this year to RGPPL, which would marginally increase generation from the Dabhol plant.

"The new gas from RIL will cost around $4.2 per million British thermal units (MBTU) against the present supply of gas by GAIL and Petronet, which costs more than $5 per MBTU, thus cutting down on fuel purchase costs. This is expected to give relief in consumer billing by 25 to 30 paise per unit. The gas supply deal with GAIL and Petronet is ending in September," according to a senior MSEDCL officer.

In the Mumbai Metropolitan Region, areas such as Navi Mumbai, Thane, Bhiwandi, Kalyan-Dombivli and Vasai-Virar are expected to benefit from the decision, along with city suburbs like Mulund, Bhandup and Kanjur.