The Telegraph
Since 1st March, 1999
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Switch-on signal for Dabhol Power

New Delhi, April 5: A deal on Dabhol is in sight.

The government is likely to unveil next month an agreement between creditors, stakeholders, the government and state-owned power utility NTPC. This signals the end of the protracted wrangle over the fate of the controversial 2184-megawatt Dabhol power project, which stopped generating electricity about three years ago.

Under the terms of the agreement which are now being hammered out, National Thermal Power Corporation (NTPC) will accept the proposal by the government to help manage the power project for its existing stake holders.

The Dabhol power project was the first fast-track private project that was launched with a great deal of fanfare in the first flush of reforms in India. It was ridden by controversy because of the counter-guarantees that the now beleaguered Enron Corporation was able to extract from the Centre. The project faltered after Enron collapsed amid a massive accounting scandal in the US.

The final draft of the agreement is likely to be discussed at a meeting of the empowered group of ministers scheduled later this month. The group of ministers (GoM) on power was constituted with a single agenda to resolve all the seemingly intractable issues that enveloped the Enron power project in the Ratnagiri district in Maharashtra.

Sources in NTPC said: 'The negotiations with the stake holders is in the final stage and an announcement is likely to be made soon. We are clear about our role; there will not be any management participation by us. It will be restricted to only operational and technical support. This has been appreciated by all concerned.'

According to a senior power ministry official, Gail has to give its proposal on the availability of fuel for the project at the rates suggested by NTPC. This is one of the last few hurdles that remains to be crossed.

NTPC has suggested that the final cost of power to be supplied to the customer from Dabhol should not be more than Rs 2.50 to Rs 2.75 per unit. At one stage, power was being supplied to the Maharashtra State Electricity Board (MSEB) at Rs 7 per unit.

At the last meeting with power ministry officials, Scott Bayman, president and chief executive officer of GE, said that his company would accept the government's proposal on an interim arrangement whereupon NTPC/GAIL will take over the operations of Dabhol and run the power plant.

The GoM on power, led by defence minister Pranab Mukherjee, has given its in- principle acceptance.

The GoM will hold another round of meeting during the month to discuss the issues related to dues of foreign lenders.

GE and Bechtel, which own the power plant, had filed a claim worth $291 million in 2003 against the Indian government at the International Court of Arbitration.

Unwilling to divulge the details of the agreement reached between the government and the foreign investors, a senior officer in the power ministry said, 'The financial aspects have been resolved at the finance ministry level and the investors have indicated that they too are willing to accept the proposal. But, the issue cannot be taken to the Union cabinet for its approval unless the arbitration proceedings are terminated. The foreign investors have to respond to this aspect, which we hope will happen soon."

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