Enron May Be Allowed Bulk Naphtha Imports

The Enron-promoted Dabhol Power Company is to be given the go-ahead to import naphtha worth Rs 1,300-1,400 crore, which will be a years requirement for its power venture in Maharashtra.

The company has forwarded an application for the import of naphtha to the directorate-general of foreign trade. The promoters would be using naphtha until they are able to get gas from their oil fields in Qatar on a regular basis.

The choice of naphtha which is expensive in comparison to LNG as a fuel, coupled with the pass-through clause in the power purchase agreement that has been sealed, implies that power tariff in the first year would be on the higher side.

 

Power analysts say the use of naphtha would increase the projects power tariff to around Rs 4 per unit in the first year, which would decrease in later years once the promoters shift to using gas (LNG) as the prime fuel.

Significantly, Enron, in its PPA with the Maharashtra State Electricity Board (MSEB), has not spelt out the fuel it would use for power generation. This means that the fuel cost for the project cannot be firmed up by the promoter as the price varies, depending on the type of fuel being used.

Naphtha is currently on the restricted list. The licence to DPC would be a special import licence (SIL) since naphtha was not on open general licence (OGL), said sources.

According to the export-import policy, the import of naphtha would be permitted without a license subject to the condition that the importer shall sell the return stream of naphtha to crude refineries only. The sale is to be on commercial terms as may be settled between the importer and the refinery.

The importer may use the return stream as an industrial feedstock for his own captive consumption but the balance left, if any, is to be sold to crude oil refineries only. In other words, the import of naphtha is restricted for non-cracking projects. As the first phase of the Dabhol power project (750 mw) is expected to come on stream by the year-end, the license to be granted would help DPC operate its project with naphtha as a feedstock.

The Dabhol project is a dual fuel project, which means that the promoters could use either naphtha or gas for power generation. The license for naphtha implies that the promoters will link the power tariff to the international price of naphtha for the period that naphtha will be used as a fuel to generate power.