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Loan rate cut impact on tariff marginal: DPC

Our Bureau

MUMBAI, Dec. 14

THE cut in interest rates on loans to the Dabhol Power Corporation (DPC) is unlikely to reduce the tariffs charged to the Maharashtra State Electricity Board (MSEB).

``The cut in rates will not make a substantial difference to the tariffs charged by DPC because this will reduce fixed cost only by one per cent,'' a senior DPC official said.

The variable costs such as the exchange rate and fuel cost remain unaffected. ``The most important aspect is the fuel cost which amounts to 60 per cent of MSEB's bill,'' the official said.

The lenders, including ICICI, Canara Bank, State Bank of India (SBI) and IFCI had agreed to cut loan rates to DPC by 450 basis points to 16.5 per cent.

At the time of revision of the power purchase agreement with DPC by the Government of Maharashtra in 1996, lending rates were around 21 per cent.

DPC has been facing rough weather after the State Government announced plans to review Phase II of the project citing high costs and tariffs.

DPC, in which Enron has 65 per cent stake, has a total debt component equivalent to $700 million. Of this, 12 per cent -- about Rs 306 crore -- is rupee loans.

The reduction in rates would amount to a saving of only Rs 9.5 crore in MSEB's annual bill, sources said.

``The rupee loan is a small component of the tariff,'' the official said. ``This only shows that the lenders are with us and that they acknowledge our commitment to the project,'' he claimed.