Equity infusion plan for Dabhol's LNG terminal approved

An empowered group of ministers (EGoM) led by external affairs minister Pranab Mukherjee has approved the equity infusion plan mooted by the three promoters of Ratnagiri Gas and Power Pvt Ltd (RGPPL) to complete the LNG terminal at the Dabhol power plant the company runs.

The state government-owned Maharashtra Power Development Company (MPCL) will invest Rs250 crore ($61.94 million) in Dabhol, which will increase its stake in RGPPL from 15 to 18 per cent, a senior official said.

The Gas Authority of India Limited (GAIL) and the National Thermal Power Corporation Limited (NTPC), both of which hold 28.5 per cent each in Dabhol, will invest Rs475 crore ($117.7 million) each.

This equity infusion will be used to meet the cost overrun in the LNG terminal project. It has gone up from the initial estimate of around Rs2,800 crore ($693.75 million) to Rs4,000 crore ($991 million).

Financial institutions, which hold a 27-per cent stake in Dabhol, have refused to invest further in the project. Initially, NTPC and GAIL were also reluctant to invest further and suggested spinning off the LNG terminal. But after the Maharashtra government''s offer to invest in the project, GAIL and NTPC also agreed to pitch in, sources said.

Meanwhile, the petroleum ministry opposed hiving-off the terminal. It felt running an LNG terminal as a standalone entity was not feasible. Considering the cost overruns, the prices quoted by prospective bidders would not be too attractive, the ministry had said. The 5.5 million tonne per annum (mmtpa) terminal is expected to be complete by 2008, and the breakwater will be built by 2010.

The EGoM also discussed the issue of the pricing and availability of gas in the country, and finalised the combined strategy of the central government, Maharshtra government and RGPPL on the writ petition that is being heard by the Gujarat High Court on the Centre''s decision of pooling of gas prices.