Enron tariffs no surprise to MSEB, reveals document

MUMBAI, DEC 20: If Enron has charged a whopping Rs 7.80 per unit for its Dabhol project, it shouldn't come as a surprise, at least for the...

MUMBAI, DEC 20: If Enron has charged a whopping Rs 7.80 per unit for its Dabhol project, it shouldn’t come as a surprise, at least for the Maharashtra State Electricity Board (MSEB). This is because, in an internal document prepared by the board way back in 1993, it had observed that Dabhol tariffs would cross Rs 5.00 per unit in 2000. This figure certainly belies all tall claims made by both the Congress and Sena-BJP governments and provides a perfect platform for the DF government to pursue it’s plan of reviewing the project.

Top MSEB sources point out that

this fact may not feature in a detailed reply that the board is currently preparing for the chief minister’s office following his announcement to review project tariffs. Vilasrao Deshmukh has asked the board to submit a reply to his statement on how the power purchase agreement (PPA) could be reviewed for re-negotiating the astronomical tariffs that the company charges the board.

Sources informed that this document was prepared for some bureaucrats who were quite sceptical about the project then and demanded a detailed sketch on tariffs (see chart).

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Commenting on the document, an energy expert said: "This is a future scenario case prepared by the board in September 1993 and is based on several assumptions. In fact, it should be noted that the tariffs shown are derived after factoring in an annual exchange rate devaluation of 7 per cent which matches today’s rates. But the fuel charges escalation annually is shown as 3.5 per cent though the prices have appreciated over 100 per cent in the last 3 years. This means that the present tariffs that Enron charges the board was quite anticipated by the board and that the government’s claim of Rs 1.90 renegotiated tariffs were clearly an eye wash."

Although MSEB has been on the defensive all the way through the controversy, this is a unique case where a clear hint on high tariffs has been dropped by the board itself.

Interestingly, the board had observed that by 1998, the company will switch over to liquefied natural gas as fuel, which is claimed to be cheaper than naphtha, which is currently being used, and that the rates derived at would have been higher on that regard too, adds the expert. However, due to lack of enough buyers, the company is going slow on LNG import plans. Enron has been sanctioned an import of 5 mmtpa LNG whereas their captive requirement for the entire Dabhol project is around 2 mmtpa.

CHART DATA

Tentative tariff forecast made by MSEB in 1993

Year Final tariff

20004.87

2005 8.22

201013.89

201421.12

* Rates based on exchange rate of 1$ = 32 with an annual devaluation rate of 7 per cent and fuel escalation rate of 3.5 per cent