project management

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Case study - Dabhol power plant

"Effective Stakeholder Management in a Project Environment"

Stakeholders are those individuals, corporations, public, and government bodies etc. which are directly affected by the outcome of a project. In recent times it has been seen in India that many projects have failed or delayed due to lack of proper stakeholder management. Some of the major projects which have failed or delayed are Dabhol Power Project, Tata's Nano Project in West Bengal, Reliance Dadri Project in UP and many more. These projects failed in the planning phase itself. In the Dabhol power project firstly the stakeholders were not identified in an efficient way and then communication various stakeholders was lacking. Stakeholder Management is a process which is continuous in nature and spans through the life cycle of the project. Stakeholders in a typical project company(special purpose vehicle ) can be discovered through various techniques like brainstorming, Delphi technique, etc and various other techniques included in this report. The next big thing in stakeholder management is doing a stakeholder analysis through which we will be able to draw a mind map of the stake holder also we would be able to rank the stakeholder according to their influencing power on the project. Next we draw a communication plan for the stakeholders, this will include type of medium, frequency, format of communication. Communication has emerged as one of the major factor affecting a project's outcome, cost and time. The diagram below shows a general framework of stakeholder management: -

In this dissertation report we have taken a study of ultra mega power plant (UMPP), which are under construction and are in various stages of completion. Ultra mega power plants will have an installed capacity of 4000 MW. UMPP policy was unveiled by the Ministry of Power through Electricity Act, 2003. The government envisages power for all by 2012, which means an addition of 100000 MW to the installed capacity at the end of 10th plan. In the 10th plan India missed the targeted capacity addition by almost half of the total to be added. Power Finance Corporation (PFC) has been assigned the task of creating five special purpose vehicles (SPV's). Of the five sites identified initially for UMPP, four have been already awarded up till now.

Objective

To find a method of controlling time and cost over runs using a better stakeholders' management techniques through the planning, implementation and closing stages of a UMPP project.

Methodology

The dissertation report is based on applied research. Various reports of international consultancies have been cited in this dissertation report. Data have been collected from infraline , Central Electricity Authority (CEA) websites. A detailed study has been done on new trends in stakeholder management.

INDIAN POWER SECTOR

To write pages and pages of theory on the power scenario in India would not be an effective way to communicate the current problems faced by this sector. The statistics given below can more effectively communicate the sense of urgency that this sector requires.

A study conducted by the Manufactures' Association for Information Technology (MAIT) and Emerson Network Power (India) reveals that in 2008-2009 power outages both scheduled and non-scheduled accounted for about Rs 43205 Crore losses to Indian Inc. This amount was Rs 22000 Crore in the year 2003.

REGULATORY FRAMEWORK IN POWER SECTOR

In India, control over the development of the power industry is shared between the Central and the State Governments. The Ministry of Power is the highest authority governing the power industry in India. The CEA, a statutory organization constituted under the Electricity Supply Act, is the technical branch of the Ministry of Power assisting in technical, financial and economic matters relating to the electricity industry. The CEA is responsible for giving concurrence to schemes involving capital expenditure beyond a certain limit as fixed by the government from time to time, and it is also responsible for the development of a sound, adequate and uniform power policy in relation to the control and utilization of national power resources. The Central Electricity Regulatory Commission constituted under the Electricity Regulatory Commissions Act1998 is an independent statutory body with quasi-judicial powers. Its main functions include the formulation of policy and the framing of guidelines with regard to electricity tariffs. Several states have set up State Electricity Regulatory Commissions (SERCs) and others are in the process of setting them up. The SERCs are engaged in regulating the purchase, distribution, supply and utilization of electricity, tariff and charges payable, as well as the quality of service. State Governments have set up State Electricity Boards at the State level, which are responsible for ensuring that the supply, transmission and distribution of electricity in such states is done in the most economical and efficient manner. These State Electricity Boards are required to coordinate with power generating companies, as well as the government entities that control the relevant power grids. Some States have amalgamated their respective State Electricity Boards to form Regional Electricity Boards, to ensure that the electricity supply, transmission and distribution policies are consistently applied. Private sector companies operating in the electricity supply, transmission and distribution industry report to the Ministry of Power, as well as their respective State Electricity Boards and their State Electricity Regulatory Commissions.

Ultra Mega Power Projects (UMPPs)

There is a great difference between the supply and demand of electric power in India. According to CEA monthly report in January'2010 the peak deficit was 12.2 % i.e. 112029 MW. A KPMG1 report sites that per capita consumption of electricity is 700 units in India, 1800 units in China and 15000 units in USA while the world average is 2300 units. Therefore to bridge this deficit and raise per capita consumption, the government came out with reforms through electricity act, 2003. Ultra Mega Power Projects are part of these reforms, in which power plants with an installed capacity of 4000 MW, with an estimated cost of Rs 16000 Crore, will be constructed across the country. The nodal agency for UMPP program will be Power Finance Corporation (PFC). Nine sites have been selected for construction of UMPP. Five sites are coastal sites, while four are pithead sites. PFC has set up separate Special Purpose Vehicles(SPVs) for each of the nine UMPPs identified so far as to act as authorized representatives of the procurers. The SPVs have been named after the name of the site.

All the 9 SPVs are wholly owned subsidiary of Power Finance Corporation Limited. Akaltara Power Limited is renamed as Chhattisgarh Surguja Power Ltd (CSPL).

The main features of the Ultra Mega Power Projects (UMPP) are:-

  1. The UMPP would use Super Critical Technology with the view to achieve higher levels of fuel efficiency, which results in saving of fuel and lower green-house gas emissions.
  2. Flexibility in unit size subject to adoption of specified minimum supercritical parameters.
  3. Integrated power projects with dedicated captive coal blocks for pithead projects.
  4. Coastal Project to use imported coal.

Role of Ministry of Power (MoP):-

Coordination with Central Ministries/Agencies to make sure:-

  • Coal Block allotment/coal Linkage
    • Environment/Forest Clearances
    • Water Linkages
  • Required support from State Governments and their agencies
  • Working out allocation of power to different states from UMPPs consultation with the states.
  • Facilitating PPA and proper payment of security mechanism with State Governments/State Utilities.
  • Monitoring the progress of shell companies with respect to predetermined timelines.

Role of Special Purpose Vehicle (SPV)

  • Appointment of consultants to undertake preparation of Project Report, preparation of rapid Environment Impact Assessment.
  • Appointment of Consultants for International Competitive Bidding (ICB), document preparation & evaluation.
  • To finalise RFQ/RFP documents in consultation with states / bidders.
  • To carry out RFQ/RFP process and award of projects.
  • Acquisition of land for the project.
  • Obtaining coal blocks for pit-head projects.
  • Getting clearances regarding allocation of water by the state Govt. for pit head locations.
  • Approvals for use of sea water from Maritime Board/ other Govt. Agencies for coastal locations.
  • Obtain clearances from state pollution control boards, initiate forest clearances etc. as required for the project and for the coal mines, followed by environment and forest clearances from the central government.
  • Obtaining geological reports / other related data from CMPDI for the coal blocks.
  • Tie up the off take/ sale of power.

Role of States

  • Rehabilitation & Resettlement Plan---Land Owners
  • Give authorization to the PFC/SPV to carry out the bidding process on behalf of the distribution utilities.
  • Facilitate signing of the Power Purchase Agreement (PPA)
  • Ensure proper payment security mechanism with the distribution utilities.

Sasan Power Ltd

Sasan is situated in Singrauli district of Madhya Pradesh. Singrauli is the 50th district of the state, Madhya Pradesh. Singrauli is known as the "Energy Capital of India". It has the 10 % of the total installed capacity of India. The district also has large deposits of coal in nearby coal fields. River Rihand has a dam on it known as Govind Vallabh Pant Sagar Dam. Thus Singrauli provides excellent conditions for thermal power generation.

Sasan UMPP is a pit head-based thermal power project with an aggregate capacity of 3,960MW (6x660 MW) using supercritical technology. The project also involves development of captive coal blocks, viz Moher, Moher-Amlohri Extension and Chhattrasal at the Singrauli coalfields to meet the coal requirements of the power project. *. Thus fuel risk is being managed by the SPV on its own. Therefore risk of fuel shortage is minimised, giving a positive impact on the project. The location of the project itself reduces many risks like availability of fuel and water. Both coal mines and a reservoir are available in the vicinity. On other hand the area is less densely populated thus problem of land acquisition automatically got resolved.

The Bidding Process

Sasan UMPP was awarded through a two stage competitive bidding process. Lanco infratech and Globeleq Singapore Pte Ltd ( a Singapore based firm) were declared winners after they quoted the lowest bid for the project of Rs 1.196 / Kw, in dec'2006. In Feb'2007 Globeleq Ltd, Bermuda, parent company of Globeleq Singapore, sold its Singapore business arm to Jindal Steel and Power Ltd and Lanco Infratech's, Mauritius based holding company. This move was challenged by the rival bidders in the court. The government declared the bid of Lanco Infratech ltd -Globeleq Singapore Pte Ltd. as invalid. A week later Reliance Energy submitted a fresh bid of Rs 1.19/ Kw. Consequently the project was awarded to a consortium Reliance Infra Ltd. this consortium consists of Reliance Infra Projects UK Ltd (RIPUL), an affiliate of REL Infra.

Sasan Power Ltd. (SPL) had invited bids on behalf of state electricity boards/ electricity distribution companies/ state electricity utilities of Madhya Pradesh, Delhi, Uttaranchal, Uttar Pradesh, Punjab, Haryana, Rajasthan and Chhattisgarh on 31st Mar'2006.

Technical Requirement for the bidders:- Should have experience of developing projects ( not necessarily power projects) in the last 10 years whose aggregate capital cost must not be less than Rs. 3000 Crores. Out of these projects , the capital cost of at least one project should be equivalent to Rs. 500 Crores. For the purpose capital expenditure on the projects that have been completed at least 7 days before the RFQ submission date shall be considered. Lead member shall be the company having at least 26% stake in the Bidding Consortium.

Financial Requirement for the bidders:- Internal resource generation equal to atleast Rs. 1200 Cores or equivalent US$ computed as cumulative internal resources generated during last five years business operations, networth of Rs. 1000 Crore or equivalent US$ based on any of the past three years annual accounts and annual turnover of Rs. 2400 Crores or equivalent US$ based on any of the past three years annual accounts. The financial requirements of each Member in Bidding Consortium shall be combined in proportion to the investment commitment by each of them.

Enclosures with the bid proposal:-

  1. Covering Letter
  2. Joint Deed Agreement between Members in Bidding Consortium.
  3. Letter of consent from all Members in Bidding Consortium.
  4. Board Resolution.
  5. Initialling of all pages of Bid by authorized signatory.
  6. Executive Summary.
  7. Last five year annual Accounts of Bidding Company or each of the Member in case of a Bidding Consortium.

Reliance Infra Ltd.

Reliance Infra Ltd. is the flagship company of Anil Dhirubhai Ambani Group (ADAG). The company develops and operates power plants both domestically and internationally. The company on its own and through subsidiaries is currently developing 13 medium and large sized power projects with a combined planned installed capacity of 28,200 MW, one of the largest portfolios of power generation assets under development in India. 13 power projects are planned to be diverse in geographic location, fuel type, fuel source and off-take, and each project is planned to be strategically located near an available fuel supply or load center. The identified project sites are located in western India (12,220 MW), northern India (9,080 MW) and north-eastern India (2,900 MW) and southern India (4,000 MW). They include six coal-fired projects (14,620 MW) to be fueled by reserves from captive mines and supplies from India and abroad, two gas-fired projects (10,280 MW) to be fuelled primarily by reserves from the Krishna Godavari Basin (the "KG Basin") off the east coast of India, and four hydroelectric projects (3,300 MW), three of them in Arunachal Pradesh and one in Uttarakhand. Reliance Power has acquired the two ultra mega power projects of 4,000 MW each at Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh. The 7,480 MW project to be located at Dadri in Uttar Pradesh is expected to be the largest gas-fired power project at a single location in the world. The power generated by these projects is to be sold under a combination of long-term and short-term PPAs to state-owned and private distribution companies and industrial consumers.

Reliance Power limitedtoday has total generating capacity of 941 megawatts from five different plants located in Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa, of which the Dahanu plant (Maharashtra) is the largest with 500 megawatts. Reliance Power is currently pursuing several gas, coal, wind and hydro-based power generation projects in Maharashtra, Uttar Pradesh, Arunachal Pradesh and Uttaranchal with aggregate capacity of over 12,500 MW. These projects are at various stages of development.

  • 5,600 MW Project (Phase I) at Dhirubhai Ambani Energy City (DAEC), Dadri in Uttar Pradesh
  • 4,000 MW Power Project at Shahapur in Maharashtra
  • 280 MW Urthing Sobla Hydro Power Project in Uttaranchal
  • 700 MW Hydro Power Project at Tato - II and 1,000 MW Hydro Power Project at Siyom, both in Arunachal Pradesh

The 941 MW Generation capacity of the Reliance Power comes from five projects:

  • Dahanu TPS - the 2x250 MW multi fuel based thermal power station at Dahanu near Mumbai.
  • BSES Andhra Power Limited: The 220 MW combined cycle power plant at Samalkot in Andhra Pradesh.
  • BSES Kerala Limited: The 165 MW combined cycle power station at Kochi, Kerala.
  • Goa Power Station : The 48 MW naptha based combined cycle power plant at Goa
  • Chitradurga wind farm: The 8 MW Wind Farm Project at Jogimatti in the district of Chitradurga in Karnataka.

Reliance Infra Ltd is also in the distribution and the transmission business. Reliance is already maintains a distribution network in Mumbai (Maharashtra) and Delhi, with the name BSES (BOMBAY SUBURBAN ELECTRICITY SUPPLY). Its transmission business is with the business arm, Reliance Power Transmission Limited (RPTL).

Chapter 3

STAKEHOLDER MANAGEMENT

Stakeholder has specific interest in the project outcome or in the initial stages of project planning, implementation and closing. If the stakeholder interest is not managed efficiently the project may get delayed or it may fail. We can say that with stakeholder management we are actually managing various risk associated with the project. Thus for efficient risk management, the project manager should have sound knowledge about the stakeholder's interests, power and influence, to achieve this, one has to identify and analyse the stakeholders.

Almost any person or organization with an interest in a project can be termed a stakeholder.

The type and interest of a stakeholder are of great importance to a project manager since they enable him or her to use these to the greatest benefit of the project. The process of listing, classifying and assessing the influence of these stakeholders is termed stakeholder analysis. Stakeholders can be divided into two main groups:

Direct (or primary) stakeholder

Indirect (or secondary) stakeholder

Direct stakeholder

This group is made up, as the name implies, of all those directly associated or involved in the planning, administration or execution of the project. These include the client, project sponsor, project manager, members of the project team, technical and financial services providers, internal or external consultants, material and equipment suppliers, site personnel, contractors and subcontractors as well as end users. In other words, people or organizations directly involved in all or some of the various phases of the project.

Indirect stakeholders

This group covers all those indirectly associated with the project such as internal managers of the organization and support staff not directly involved in the project including the HR department, accounts department, secretariat, senior management levels not directly responsible for the project, and last but not least the families of the project manager and team members. A sub-section of indirect stakeholders are those representing the regulatory authorities such as national and local government, public utilities, licensing and inspecting organizations, technical institutions, professional bodies, and personal interest groups such as stockholders, labour unions and pressure groups. Each of these groups can contain:

  1. Positive stakeholders: who support the aims and objectives of the project
  2. Negative stakeholders: who do not support the project and do not wish it to proceed.

Direct stakeholders mainly consist of positive stakeholders as they are the ones concerned with the design and implementation of the project with the object of completing it within the specified parameters of time, cost and quality/performance. They therefore include the sponsor, project manager and the project design, construction/installation teams. This group could also have negative stakeholders such as employees of the end user, who would prefer to retain the existing facility because the new installation might result in relocation or even redundancy

We can divide the stakeholders based on various project requirements. The stakeholders a project are:

  1. Government—Central-State Governments, Government Organisations, Regulator
  2. Finance—Banks, Financial Institutions
  3. Concessionaire—Project Manager, Project Team Members
  4. Consessionee—Government Organisations
  5. Technology—Suppliers, Technology owners
  6. Environment - Government Ministry, International Watchdog
  7. Land—Land owners
  8. Water—Ministry of Water Resources
  9. Fuel—Coal Ministry

Stakeholders in a Business

A successful business first identifies its key stakeholders and identifies their needs. A company can accomplish its stakeholder goals only by managing and linking work processes. High-performance companies are increasingly focussing on the need to manage core business process such as new product development. They are reengineering the work flows and building cross functional teams responsible for each process. For a business the stakeholders may be as following:

Importance of Stakeholders Management

  • Powerful stakeholders can influence the project in a big way
  • Powerful stakeholders can help the project in securing important resources.
  • Experienced stakeholders can guide the project managers during tough times.
  • Communicating with the stakeholders early and often can make the stakeholders understand the benefits of the outcome of the project.
  • It leads to understanding the reactions of the stakeholders during the progress of the project and thus the project manager can do the needful changes if required in the project.

Stakeholder Analysis process:

Stakeholder Identification

The first step in stakeholder analysis is the identification of the key stakeholders. When the project manager starts identifying project stakeholders , he should do an organised study by giving the project's geographic sphere of influence. Here consider not only the main project site, but also the related project facilities, like the road to the site, cumulative affect of the project outcome or unplanned but predictable developments. Using this type of analysis to determine the project's area of influence and finding out that who all may be affected in this manner. This process will reveal those stakeholders, who are directly influenced by the project, may be by use of land , or by the effect to the nearby environment or by the process of new job creation. One of the techniques used for stakeholder identification is "impact zoning"

Impact Zoning @

By mapping the sphere of influence of different types of environmental and social impacts, the project company can begin to identify distinct groups by impact area, and from this prioritize stakeholders for consultation.

Steps in Impact Zoning

  • Draw a sketch map of the key design elements of the project, both on and off site, that may give rise to local environmental or social impacts (e.g., the project site; ancillary infrastructure such as roads, power lines, and canals; sources of air, water, and land pollution).
  • Identify the large impact zones for each of the elements
  • Next over lay , the large stakeholder groups, over the impact zones.
  • Through consultation with relevant stakeholder representatives, verify which groups are potentially affected by which impacts. This exercise may be performed more efficiently by using aerial photographs.

The other common technique of stakeholder identification is brainstorming

Chapter 4

COMMUNICATION

One of the largest contributing factors for project failure or delay is lack of proper communication with the stakeholders. When communication is limited to periodic reports stakeholders, can be in dark as to when the project begins to slip. It may slip to a point, from where it is very difficult to recover the project. The remedy is consistent, frequent and candid communication. The project manager uses plans, agreements and status reports to communicate with the stakeholders and manage their expectations. In addition, as with everything on a project, a solid plan improves the probability of success. Every project should have a communication plan, a written strategy for getting the right information to the right people at the right time. The stakeholders identified in the SOW and responsibility matrix are the audience for most project communication.

Information management

In today's world, where there are ample mediums for communication, there is no shortage of information but instead there is abundance of information, which the stakeholder is not able to handle in the right way.

Data and Information

Information is always tied to the purpose of the stakeholder. Information is based on data, which is useful only when it is organised in a meaningful manner. It is the responsibility of the project manager to provide information to the stakeholder in a manner which is useful to them. Information can be classified as i) Relevant Information ii) Used Information iii) Cassandra Information.

Therefore it is important to feed the right amount of information which can be used by the stakeholders. Otherwise it would lead to increased spending, increased confusion and consequently time delay in project completion.

Guidelines to make a communication plan

  • Use precise & short status reports: obese reports are overwhelming for a busy audience. Determine what should go into the status report, by interviewing the stakeholders what they want. Different stakeholders may want reports on different aspects of the project.
  • Have an escalation procedure: these are the procedure to elevate problem to senior management.
  • Make the information timely: Executive sponsors may want reports less frequently than your immediate manager.
  • Make sure regular status meetings are included in the plan: Many stakeholders may require meetings on project status as and when needed, i.e. only when there is big event or problem. By including schedule meetings in the communication plan, customers and higher level managers are agreeing to be more informed about the project- which avoids unpleasant surprises in the project.
  • Be consistent with other projects: As much as possible, your project documentation should have the same look and content as other projects in your organisation. If there are standards, use them. If not, find good examples from good examples from other projects which have same stakeholders.
  • Use multiple channels of communication: websites, newsletters, and project bulletin boards can be used to post information of interest to all stakeholders. These communication mediums complement status reports because they can provide a wider scope of information. Finally, realize what you say in the written report may come across differently when you present it verbally, so consciously include face to face meetings in your communication plan.

Communication Medium

Choosing the right kind of medium for the right kind of stakeholders is again an area to be looked into. A communication medium should have the following characteristic:

  1. It should be easily accessible.
  2. It should be fast.
  3. It should be recoverable later at anytime
  4. It should be cost effective.
  5. It should be easy to use.

There are many communication mediums available today. It depends on the project manager to use which kind of medium to communicate to a particular stakeholder. Below there is alist of mediums available:

E-mail: the use of electronic mail continues to be extensive. Some contend that email is an overused (and sometimes inappropriately used) medium. It is certainly convenient to use for most of the people. And it reaches widely dispersed and distant recipients quickly, although there is no guarantee that the recipient will read the message immediately. It automatically provides the record for the sender and the receiver. Also as it is with other written messages, email messages are also subject to misinterpretation. With the ease, by which email messages can be forwarded, one should be careful about what one write in the email. Overall email is a convenient medium of communication.

Telephone: Calling someone on the telephone can be an immediate interactive method of communication, without creating a permanent, written record. Phone conversation allows you to hear voice inflections, although obviously you cannot view body language. Although an upbeat phone call is considered "warmer" than a written note, it doesn't have the same effect as a personal visit or any other face-to-face interaction. Unanticipated phone calls are subject to the same shortcomings or advantages of impromptu communications.

Voice Mail: When people don't answer their phone, you can often rely on voice mail. This may create issues for you, if you're not careful. When you place a call, you're often expecting a dialogue. If you're forced to use voice mail, you must immediately convert your message to a monologue, which doesn't always come out sounding as you'd like it: the message can become awkward or confusing for the recipient. And, as with e-mail, there's no guarantee that the message will be received in a timely manner.

Handwritten Notes: Probably the most informal of the all communication modes are the handwritten notes. Short hand written notes are an excellent way to provide positive recognition. Although they take very little effort, they convey "the personal touch" much more than the verbal approaches or formal memos or emails. The drawback of these kind of notes is that they are geographically limited.

Printed and Mailed Memos and letters: with the advent of email, memos and letters are now generally reserved for more formal or official communication. They are slow and one sided, but good when formal signatures are required and a permanent record is desired. Hence, printed, mailed memos and letters are still used in contractual transactions.

Informal Visits: A visit is simply an informal and personal way to maintain a communication link with a stakeholder. Although you may not be carrying any important message, an informal visit can often lead to a more valuable or productive communication session than you might have expected from a formal communication. Informal visits are also appropriate when confidential, personal, or sensitive subjects need to be covered.

Formal Presentations: Formal Presentations are often used in situations where the distribution of information may be enhanced by an explanation or the information is too complex for written documentation. Formal presentations are often done in a group setting, thus ensuring that everyone gets the same level of understanding. They allow for impressive graphical displays of information, but often require a lot of preparation. They're effective when you're trying to promote understanding, enlist support, or expedite a decision (e.g., management approval to proceed). However, formal presentations can be challenging or risky, as you rarely have control over the entire session. And, if poorly done, they may do more harm than good.

Communication through Project Management Software: This method of communication is unique. This is a new feature accompanying the project management software. It enables team members to provide status to the project manager without any need to meet face-to-face.

EoA:- Ease of Access EoU:- Ease of Use

Mark on scale of 1-10

Frequency

In some of the cases, stakeholders may be very busy people. Also they may be having stakes in many other projects . this may make their task of keeping track of each and every project a tedious exercise. They may prefer a single medium for communication or at the most two mediums. Let's take an example of the email; mail box of the stakeholder may be getting status updates from various projects. If the project manager mails the status report very frequently, say, every day or every week, this may irritate the stakeholder. Consequently the stakeholder may lose interest in the mails from that particular project manager. Thus the stakeholder may lose track of important development. It is important for the project manager to analyse the stakeholder in totality. PM should draw a communication plan putting in front the needs of the stakeholder. These needs may comprise of information required by the stakeholder, time of communication, number of times information is required in a month, quarter or in a year.

Chapter 5

Failure Case Study: - Enron Power Plant at Dabhol in Maharashtra Case Study was written in year 2002*

The central government amended laws in Sept. 1991 to allow private sector participation in power projects. The congress government in Maharashtra and the Enron Company signed a MoU to produce 2015 MW power in June 20, 1993. In December 1993, the MSEB signed the power purchase agreement (PPA) with a tariff of Rs 2.40 per unit in 1997 and will go up gradually. The Government of Maharashtra signed the guarantee in Feb. 1994 and counter guarantee by government of India in September 1994. The construction work of the project started in 1995 on 300 acre plot overlooking scenic Vashisti river near Anjanveli village.

The project, the first to be developed through direct foreign private investment, involves the setting up a 2015 MW combined cycle gas plant based on the use of eco-friendly liquefied natural gas (LNG). It will come up in two phases. In the first phase, it is expected to commence operations for generating 695 MW and development of a harbour at Dabhol and fuel oil facilities in the first quarter of 1996. In the second phase, an additional 1320 MW capacity will be added by the end of 1997. The total cost estimated is Rs. 9053 Crores which includes a power plant, development of harbour and LNG terminal for re-gas facilities.

The fuel requirement for the power station will be met using LNG which will be procured by the company from West Asian Countries like Qatar and Oman. Enron has already signed a letter of intent with Qatar for a $ 4 billion, five million tonne annual capacity gas project as Qatar is the most likely source of gas for the project.

This agreement was justified by the congress government Chief Minister Mr. Sharad Pawar. The present power capacity of Maharashtra is 9987 MW which is less by 2000 MW as per the present connected load and 300 MW is in demand. It is likely that the demand may go to 16600 MW by the end of 2005 whereas the generating capacity including Enron project of 2015 MW would be only 13055 MW. He stressed further that considering all the existing plant capacity and new plant additions, there will still be shortfall of 4860 MW capacity and 32916 mega units as per the demand projections, particularly in view of the liberalised industrial policy.

The project was scrapped by the NEW Maharashtra government on August 3, 1995 as per the recommendations submitted by the Munde Committee on July 18, 1995. Major drawbacks cited by the committee were:

  • There was no competitive bidding
  • Project cost and tariffs were higher than the other projects in India
  • Commitments were made to the project before making an Environment Impact assessment.
  • Bribes were paid to officials in the name of "Education Fund" of $20 million.

A key stakeholder whose interests and position were a source of constant guessing throughout meetings of the project lenders was the Government of India (GoI). The GoI was a important stakeholder not only because of its defaulted counter-guaranty of the PPA and its inherent interest in seeing the power needs of the country satisfied, but also because of its risk of being held responsible under various international agreements to the extent arguments might be successfully advanced that Indian agencies had engaged in a behaviour that was, as least in effect, expropriatory.


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