The Maharashtra government and the Maharashtra State Electricity Distribution Company Limited (MahaVitaran) on Thursday announced the power-purchase agreement with Ratnagiri Gas and Power (former Dabhol power) has been terminated and the company was free to sell to other buyers.

Both the government and the state-owner distributor said it could not afford to buy Dabhol power at Rs 5.50 a unit as proposed by Ratnagiri. It was quite high when compared to the power from Maharashtra State Power Generation Company (MahaGenco) plants at Rs 3.30 a unit.

The private company, too, can now revive its Dabhol power plant, closed since December 2013 on account of the power-purchase agreement, and sell power to other states such as Telengana, Andhra Pradesh and Karnataka At a meeting on Thursday, in the presence of Union Power Minister Piyush Goyal, Chief Minister Devendra Fadnavis, Ratnagiri board members, and project lenders it was decided that MahaVitaran will not pay arrears of Rs 2,000 crore, claimed by the private power company, because of unilateral change in the agreement. The government and MahaVitaran said the agreement with Ratnagiri has been terminated through a letter sent on January 12.

The state has now put the ball in the court of the Centre and Ratnagiri to revive Dabhol project. Fadnavis also said sale of Dabhol power project to a private entity was not under consideration as it would not be a viable proposition unless adequate gas was available for its revival.

He, however, added the completion of LNG terminal by GAIL India with a total capacity 5 million tonne per annum will help Ratnagiri to mobilise an annual revenue of Rs 1,200 crore.

The stand taken by the state government and MahaVitaran is quite crucial when Dabhol power project lenders including IDBI Bank, ICICI Bank, SBI and Canara Bank have been insisting on further conversion of debt into equity to avoid the project turning into a non performing asset.

However, Ratnagiri has expressed its reservation as after the conversion of the debt of Rs 405 crore into equity in December last year, the equity has surged to Rs 3,370 crore from Rs 2,965 crore. Its authorised capital is Rs 3,500 crore and there is no further scope to convert debt into equity.