Fuel shortage is not the only problem the Dabhol power project is faced with. It turns out that one of its shareholders and beneficiaries, Maharashtra State Electricity Distribution Company (Mahadiscom), is also partly responsible for the project's financial woes.
In a letter to power secretary P K Sinha, IDBI Bank chairman M S Raghavan has said the state government's discom has failed to pay Rs 1,003 crore to Dabhol, making it difficult for lenders to keep the project's loan account out of the list of bad debts.
Mahadiscom is Maharashtra government's distribution arm. The state government, through MSEB Holding Company, owns over 17% in Ratnagiri Gas and Power Private, the joint venture with state-run utilities NTPC and GAIL that owns the project.
"While the company is facing serious liquidity problems owing to stoppage of gas supply from RIL (Reliance Industries), the delay in release of payments by MSEDCL (Mahadiscom) has further strained the cash flow position of the company (Dabhol)," Raghavan has said.
According to Madhavan, The discom owes Dabhol Rs 497 crore for power purchased from the project during the April-July 2013 period and another Rs 506 crore towards recovery of 'fixed charges' for the capacity declared available on the basis of using imported liquid gas as fuel.
Sources said the discom made a payment of Rs 50 crore against its outstanding on December 30 after Madhavan wrote to Sinha. But bankers described this as too little too late.
No wonder then that Dabhol has been defaulting in servicing its debt since October 2013. It ran up overdues of banks and institutions of around Rs 331 crore. It is reported to have made a minimum payment of Rs 167 crore by December 31 to avert being tagged as a non-performing asset. But going by Madhavan's letter, it may be only a temporary reprieve and saving Dabhol from being declared as an NPA would solely depend on Mahadiscom clearing its dues regularly.
As TOI first reported on October 7 last year, ICICI Bank managing director Chanda Kochhar first sounded alarm bells over loan default by Dabhol and its devastating impact on the banking sector that has an exposure of Rs 8,500 crore to the project.
The project's problems started in October when gas flow stopped completely under the government's policy decision forced by a sharp fall in output from RIL's KG-D-6 field. The government was forced to divert the available gas away from power plants from RIL's field to fertilizer plants.
Mahadiscom rejected Dabhol's proposal to run the plant on costlier imported liquid gas on the ground it would push up the power tariff beyond acceptable levels. As a result, the company is struggling to recover even the fixed costs on its capacity.
Dabhol is one of the showcase business rescue missions the Centre carried out by taking over the mothballed plants and an adjacent gas shipping port after US energy major Enron went bust in 2001.
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