The Prime Minister's Office (PMO) has stepped in to keep afloat Ratnagiri Gas and Power, the second avatar of the jinxed Dabhol power project. It has called a meeting of key stakeholders to resolve issues plaguing the company, convince the Railways to enter into a power purchase agreement, and expedite the demerger of the LNG division. Almost a decade after lenders and public sector companies revived the troubled project, RGGPL, with about Rs. 80 billion debt, is dealing with a string of issues and PMO's move can be a shot in the arm.
On top of the agenda for the meeting that is scheduled to take place on March 4 is to resolve the issue relating to the power purchase agreement between the railways and the RGGPL which has seen a stalemate due to disagreement over pricing.
The PMO may ask the Maharahstra state government to waive off state-wise transmission charges and transmission losses, and also waive off the tax on gas to the project to make the power more viable. The plan for the demerger of the LNG regasification unit from the power unit has been approved by lenders but certain issues raised by Power Finance Corporation and LIC have to be sorted out.
The agenda for the meeting seeks PFC, which has loaned Rs. 12 billion to RGGPL, to approve the demerger scheme and "separately deal with reconciliation issue of past dues". It will also take up the modification on guarantee for bonds sought by LIC which has an exposure of around Rs. 14 billion through these bonds. (LIC had funded some of the foreign creditors when the Dabhol account was reorganised by banks)
"This is a stressed asset and we feel that now that the PMO has taken it up, the problems may ultimately get resolved and the power plant and LNG terminal would start operating successfully," a top executive involved in the discussions said.
The power pact between RGPPL and Indian Railways hit a roadblock as the latter wanted to pay not more than Rs.5 a unit (including the state-wise transmission charges) which the generator argued was unviable.
"The Railways is currently drawing 500 mw from RGGPL and has agreed to continue with the quantity but the two parties are yet to reach a consensus on the tariff," an executive involved in the negotiations said.
The PMO is working on getting both the parties to agree to 500 mw of electricity at Rs.5.50 a unit for the power purchase agreement. Also, it is seeking Maharashtra government's cooperation to waive off state-wise transmission charges and transmission losses, and value added tax or GST.