Custom duty off on naphtha for Dabhol: Fin Min

New Delhi, July 7: In a move that would ensure smooth running of the 740 MW phase-1 of the 1,284 MW Dabhol Power Project the Finance Ministry has accepted the Power Ministry's request to waive off customs duty on naphta, the shortage of which had threatened the shut-down of the revived project.

A formal notification will be issued early next week, sources said.

At a recent meeting between the Power and Finance Ministries' to take stock of the situation arising out of the acute shortage of naphta to fuel Dabhol, the Finance Ministry has accepted the long pending request for the waiver of custom duty on Naphta.

The sources said even the cabinet had taken a decision in this regard. The waiver of customs duty has already been made applicable for liquefied natural gas (LNG).

The decision to relinquish custom duty would be a respite to electricity-strapped Maharashtra, which would be able to draw power at rate of around Rs 5.25 per unit.

Without the waiver of custom duty, Maharashtra State Electricity Distribution Company (MahaVitaran), the sole buyer of the Dabhol power, would have been compelled to draw power at a tariff as high as Rs 7.50 per unit.

The procurement of naphtha within the country is more expensive than importing, as the fuel is priced at export parity prices.

Dabhol project renamed Ratnagiri Gas and Power Pvt Limited (RGPPL) is a 50:50 joint venture between GAIL India and NTPC.

The two billion dollar project is situated in Ratnagiri district of Maharashtra.

The LNG terminal is yet to be completed and the RGPPL is yet to close deal for LNG supplies. An ad hoc agreement between RGPPL and MahaVitaran was made for the drawal of power at Rs 4.25 till June, but due to the uncertainity over the availability of naphtha and fuel prices expected to escalate to Rs 7.50 a unit, Mahavitran has said that it will not draw power from RGPPL from July 1 onwards.

The current tariff of Rs 4.25 per unit was due to the 35,000 tonnes of naphtha available with RGPPL at zero value.

RGPPL, had re-started generation from the plant on May 1 after a five-year gap. The project has used the naphtha that was in stocks when it closed in June 2001.

The project was revived using naphtha instead of LNG, as a stop gap agreement, to help power strapped Maharashtra especially in summer months.

Maharshtra had been receiving about 350 MW electricity from RGPPL, but with RGPPL trying to purchase new stock of naphtha, new rates have to be finalised.

UNI