State Firm On Balancing Dpc Bills Against Penalty

The Maharashtra government has reiterated its stance that the Enron-promoted Dabhol Power Company (DPC) adjust the bills for December 2000 and January 2001 against the penalty of Rs 401 crore slapped by the Maharashtra State Electricity Board (MSEB) on the company.

This was done at a high-level meeting convened by the Centre in New Delhi on Tuesday. The meeting was attended by Union finance secretary Ajit Kumar, representatives of MSEB and Maharashtra principal secretary (energy), V M Lal.

The meeting was convened to seek the advice of the state government on how best to proceed with the process of conciliation initiated by the Centre and DPC over the December 2001 bill of Rs 102 crore.

DPC in February invoked the Centre's counter-guarantee after the state government failed to honour its guarantee when MSEB defaulted on the December bill.

"The Maharashtra government upheld MSEB's case and said that in the conciliation process the same stand should be reiterated," sources who attended the meeting told Business Standard. MSEB's case is that DPC had not supplied power at required levels on January 28.

It said that this meant that DPC had to pay a penalty of Rs 401 crore and the bills should be adjusted against that. DPC did not buy this point of view and invoked the counter-guarantee. Subsequently, the Centre too upheld MSEB's case and the two sides then decided to initiate a process of conciliation and arbitration which is underway.

The Centre is represented by Jeevan Reddy while DPC has nominated Laurence Street. The third nominee is likely to be decided upon by the two already nominated.

The meeting also discussed the prospect of the offshore lenders authorising DPC to terminate the contract. The offshore lenders has been persuaded by the domestic lenders with great difficulty at a meeting in London last month to desist from such a move.

They had bought three weeks to convince the Indian government to change its stand, which expired on Tuesday. However, sources refused to divulge the details on what transpired on this issue.