Mumbai: The beleaguered Dabhol power project in Maharashtra hit another bump with the contractors for the LNG terminal, Punj Lloyd and its British partner Whessoe threatening legal action against Ratnagiri Gas and Power Pvt Ltd (RGPPL) for default on payments.

The 50:50 Punj Lloyd-Whessoe joint venture sent a notice of default on March 16 to RGPPL, the owner of the 2,150 MW power plant and its ongoing five million tonnes LNG terminal project, for clearing all payments due for work already completed.

The joint venture was awarded a Rs500 crore contract for completing the jetty facilities in June last year with a target date of July 2007 for completion. Besides, Rs51 crore of dredging work and Rs15 crore of marine work was also awarded.

RGPPL has so far made payments of only Rs68 crore against Rs317 crore worth of work executed on LNG jetty and dredging. "Bills worth Rs265 crore are pending with RGPPL," sources pointed out.

The joint venture has threatened to take legal action against RGPPL in Singapore and remove its equipments from the site if the payments are not made by April 2, official sources said.

RGPPL, a joint venture of NTPC, Gail, IDBI-led lenders and the Maharashtra State Electricity Board, took over the Dabhol project in 2005.

Only one of the three power blocks was operational at that time while the LNG terminal was 85 per cent complete.

RGPPL, which has been running on loans from financial institutions, requires Rs450 crore for revival of power plants and Rs565 crore for the LNG terminal project and does not have the money to pay the contractors, the sources said.

The Dabhol plant is currently running on naphtha and was to switch to gas after March 31, 2007. However, gas is yet to reach the plant. GAIL is hoping to complete the Dahej-Uran and Dabhol-Panvel pipelines only by mid-May.

While problems with the farmers in Maharashtra have been sorted out. Gail is targeting end-April or mid-May as likely date.

Now that the power plant will have to run on naphtha for another month or so, the cost of power would go up by another Rs2.50 per kilowatt hour. "The additional cost of commissioning the power plant and the LNG terminal would be almost Rs1,400 crore," GAIL officials said.

RGPPL is also seeking a higher price for the power from the Dabhol plant. While MSEB has agreed to buy power at 96 paise, GAIL is looking for price of around 99 paisa per unit.