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‘Freeze Dabhol project cost’

NEW DELHI: Expressing serious concern over the continued inflation in completion cost of the Dabhol power project, a concerned Finance Ministry has asked the Power Ministry and Petroleum Ministry to put a freeze on the investment needed to complete the power block and liquefied natural gas (LNG) unit.

The completion cost of the project is understood to have been revised twice and after the recent visit of the Group of Ministers (GoM) to the project site, it is apprehended that a further revision in cost was in the offing.

The cost, which was estimated at Rs. 870 crore when Indian lenders and a consortium of National Thermal Power Corporation (NTPC) and Gas Authority of India Limited (GAIL) took over the 2,150 MW gas-fired power plant, was put at Rs. 1,960 crore in September 2006 and has now been further revised to Rs. 2,144 crore, excluding Rs. 220 crore for mandatory spares.

The Finance Ministry has pointed out that lenders — IDBI, ICICI Bank, SBI, Canara Bank and IFCI — had made a commitment to do financial structuring in the event of the completion cost exceeding Rs. 870 crore to ensure that the project cost does not exceed Rs. 10,038 crore.

“The commitment made by the lenders to absorb the increase in completion cost cannot be indefinite and open-ended. The lenders cannot be held responsible for any delay in the implementation of the project and the consequent increase in costs,” it has stated in its recent communication.

The Finance Ministry had demanded that the project cost be frozen at Rs. 2,364 crore (including cost of mandatory spares and contingencies). The project was originally scheduled to be completed by September-November 2006 but has been delayed due to various reasons, including non-availability of gas. Two of the three power blocks are now operating and the third is expected to commence operations in February-March.

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