Naphtha duty cuts to rescue Ratnagiri

The petroleum ministry is expected to come out with a fresh package of duty cuts on naphtha to help Ratnagiri Gas and Power Pvt Ltd continue running its plant, even as it is preparing to close down as stocks of naphtha are running out fast.

An official of Ratnagiri Gas and Power Pvt Ltd (RGPPL) told Business Standard that a couple of rounds of discussions had already taken place on the proposal and that the petroleum ministry was working on a package, which would be announced soon.

Power Secretary RV Shahi had written to the Cabinet secretary asking for exemption from import parity on naphtha pricing. If import parity was abolished then, Shahi argued, the variable cost of power generated using naphtha could be brought down to Rs 4.30.

Shahi's letter pointed out that a waiver on all central and state duties and taxes would result in a price reduction of nearly Rs 10,000 per metric tonne of naphtha, from Rs 35,004 per million tonne to Rs 25,395 per million tonne.

RGPPL officials claimed that naphtha stocks at the plant were enough to run it till June 30, its mandated date. The company's internal estimates revealed that the stockpile of naphtha was enough for two or three days only.

The plant had been producing between 160-300 Mw of power, but will reduce the load to maximise fuel usage, RGPPL sources said.

If RGPPL sources naphtha from the spot market, its cost of power will shoot up to Rs 8 per unit. However, the Maharashtra State Electricity Distribution Company (MSEDCL) has refused to buy power at more than the current prices.

The MSEDCL had an agreement to buy power from RGPPL only for 55 days at Rs 4.25. It has already made arrangements to purchase up to 800 Mw of power from West Bengal and Orissa to tide over the current shortage.

But an MSEDCL official clarified that the company would prefer to buy power from RGPPL post-monsoon, when the deficit in the state would again shoot up to 4,500 Mw.

RGPPL sources said it would have no choice but to close down the plant if the MSEDCL was not willing to buy the power generated.