RGPPL’s 500MW Power Supply proposal to Railways hinges on IR’s demand for Exemption of VAT/STU/CTU Charges

Mumbai: Ratnagiri Gas and Power Private Ltd (RGPPL)’s proposal to revive Dabhol Power Plant by selling 500-MW power to Indian Railways hinges on three conditions, according to a senior company official and a lender. Indian Railways has said it will buy the power only if value-added tax (VAT) is exempted by the state government and state transmission charges (STU) and central transmission charges (CTU) are waived by the respective authorities.

“While Central Electricity Regulatory Commission has already waived the CTU element, for STU, the state government has to write to MERC, on the basis of which the regulatory will order the exemption. The government is yet to act on the VAT and STU waiver,” the official said.

The signing of the power-purchase agreement (PPA) is independent of these approvals, but Railways will not buy power till the conditions are met, according to the official.

Lenders, led by State Bank of India (SBI), met Maharashtra government officials last week to suggest they waive these charges to facilitate the deal. “Since Railways won’t buy power unless the waivers are sanctioned, the fate of the plant is uncertain once again,” a lender spoke on the condition of anonymity.

The agreement with Railways is under the Power Sector Development Fund (PSDF) scheme, floated by the Centre in 2014. The scheme envisages waiver of state-based charges, which will enable a uniform power-purchase cost across states. The Railways intends to use RGPPL power in Maharashtra, Gujarat, Madhya Pradesh and West Bengal.

Railways will buy the 500 MW at Rs 4.70 per unit, and the Centre will add an additional Rs 1.45 per unit as subsidy, which means RGPPL will net Rs 6.15 per unit from the sale of power. The amount will be collected directly in an IDBI Bank account – which will then be used to pay fuel, operation and maintenance expenses and the balance will be retained by lenders for servicing the company’s loans.

The official said, with the current gas allocation being until September 30, banks should collect about Rs 150 crore, which would service some part of the interest on loans. The company pays banks an interest rate of 8% and its net debt stands at Rs 7,645 crore.

The 1,967-MW plant, after the allocation of gas, is getting 0.9 mmscmd, though it needs 1.3 mmscmd to function at full plant load factor (PLF). “Currently the allocated gas is enough to generate power at 200 MW daily. But we don’t have any buyers lined up,” said the official.

RGPPL’s FY14 net sales fell 56% to Rs 965.49 crore – including re-gassification income of Rs 84.39 crore. Net loss widened to Rs 1,486.47 crore from Rs 375.33 crore in FY13.