Friday, September 9 2005 15:33 Hrs (IST) - World Time -

New Delhi: The Government will grant a host of fiscal concessions, including mega power project status and duty free import of LNG to the 2.94-billion dollar Dabhol power project so as to restart the troubled plant by 2006-end.

The empowered Group of Ministers (eGoM), headed by Defence Minister Pranab Mukherjee, yesterday (Sept 8, 2005) decided to grant mega power project status to the Dabhol project and waive of capital gains tax on transfer of assets from Dabhol Power Co to the newly formed SPV, Ratnagiri Gas and Power Pvt Ltd.

RGPPL is a company promoted by gas firm GAIL and power utility National Thermal Power Corp (NTPC), who have been tasked to complete the unfinished portion of the power plant and restart the project by end of 2006.

Top officials said the Finance Ministry would waive 5 per cent customs duty on import of 2.1 million tonnes of liquefied natural gas (LNG) to fire the 2,184 MW power plant.

While the waiver of import duty would help bring down the cost of fuel and enable power generation at Rs 2.30 per unit, grant of mega power project status would enable Dabhol to benefit from tariff concessions on imported capital equipment required to complete the 1,444 MW Phase-II and LNG facilities.

GAIL and NTPC have been given the reprieve that their investment in completion of LNG/marine facilities and power plant would not exceed 200 million dollar. And if it does exceed, the institutional lenders would take the financial liability for the excess expenditure.

Subsequent to this, the board of GAIL and NTPC would meet over the next two days to clear investment of Rs 500 crore as their equity contribution in the SPV that would takeover DPC, the official said.

Other concessions given to Dabhol include, waiver of customs duty on import of spare parts for 5 years and exemption from payment of service tax on construction and site preparation activities.

The revival scheme also provides compensation to previous owners GE and Bechtel, who were demanding a total of 350 million dollars. The government has agreed to give 145 million dollars to GE and 160 million dollars to Bechtel.

Officials said any increase in the completion cost beyond the present estimate of 200 million dollar would be absorbed by the Indian financial instituions such that the fixed cost will not vary.

As of now, the completion cost remains unknown. In 2003, Tractable had estimated the capital expenditure for completing the project at Rs 670 crore and later revised it in early May 2005 to Rs 848 crore (about 190 million dollars).

The government plans to restart the first phase 740 MW by June 2006.

GAIL is targeting at an ex-ship LNG price in the range of 3.30 to 3.40 dollars per million British thermal unit (mBtu) so as to generate power from Dabhal project at Rs 2.30 per unit with a fixed cost of Rs 0.93 per unit and a variable cost of Rs 1.37 per unit, officials said.

As a promoter, GAIL's role would be to source LNG required to run the power plant. It would also complete the remaining erection works of LNG terminal, which is 75 per cent complte, and operate the terminal. NTPC on the other hand, would operate the power plant.

The capacity of the LNG terminal is 5 million tonnes per annum of which 2.1 million tonnes would be required by Dabhol plant. GAIL would be developing the necessary infrastructure for distribution of the remaining 2.9 million tonnes of R-LNG in the neighbouring area.