Maharashtra may bear extra tariff, discount in VAT for Ratnagiri power

It’s good news for lenders to the 2,150-mw Ratnagiri project, previously Dabhol project as the power starved Maharashtra is not averse to increase in the per unit tariff by at least four paise. The state government, which is heavily relying on the commercial operation of the project from December onwards, would also express its desire to discount 8 paise VAT on sale of gas. The state government would make its stand clear on these issues at the ensuing meeting of empowered group of ministers (EGoM) led by external affairs minister Pranab Mukherjee scheduled for June 7.

Informed sources told FE “Lenders comprising IDBI, ICICI and SBI have argued that Maharashtra should be ready for increase in all six paise in the fixed component of the tariff and also discount VAT on sale of gas. This was necessitated in view of rise in the working capital due to increase in gas prices, lack of beginning of debt recovery service period. Lenders want that four paise be increased in the fixed component and 2 paise for debt recovery service period.”

Maharashtra has already agreed for rise in the fixed cost from 96 paise to 98.5 paise and subsequently, the Maharashtra State Electricity Distribution Company (MahaVitaran) signed power purchase agreement with the Ratnagiri Gas & Power Pvt Ltd (RGPPL) for the drawal of power at Rs 3.10 per unit. Subsequently, Maharashtra government and MahaVitaran took aggressive stand and declined to bear additional tariff.

However, sources said that the state government would put up a proposal for hike of four paise from 96 paise and not from 98.05 paise. Besides, it would be ready to discount VAT on sale of gas as the Centre proposes to provide 5% discount in the customs duty. “However, lenders want four paise increase from 98.05 paise and in addition to that two paise rise to bear the debt recovery service. In nutshell, the lenders want that the fixed cost component should be increased from Rs 1.05 to Rs 1.07. The state government is opposed to it but it may settle for fixed cost component of Re 1. If lenders stick to their guns, let EGoM take a final decision on this issue, sources noted.

Sources said that the lenders have made it clear that the tariff would need to reflect the actual expense to be incurred towards interest on working capital which as per the current cost of gas required the tariff to be increased by four paise per unit.