The Maharashtra cabinet on Monday gave its consent for a five-year tax holiday to the Ratnagiri Gas and Power Private Ltd (RGPPL) in an apparent bid to revive the 1,967mw gas-based power project that is lying shut since 2014.

The intention is to ensure that a sustainable natural gas supply to the plant is restarted so as to shore up the power generation capacity in the country. The erstwhile Enron promoted, Dhabol Power Company (DPC) was taken over by a consortium led by Indian lenders to the ambitious project after the exit of Enron.

According to a press release issued by the state secretariat on Monday, “The shortage of available and sustainable natural gas supplies had resulted in power generation activities grinding down to a halt at the power plant that was forced to close down in January 2017. With a consolidated debt burden of over ?8,900 crore, the RGPPL operated power plant was in imminent danger of being declared a 'Non-productive Asset' (NPA).”

The cabinet decision means that RGPPL is effectively exempted from paying any tax under Value Added Tax (VAT), or Goods and Services Tax (GST) for a five-year period starting from April 1, 2017. In addition, the power plant is also exempt from paying wheeling charges as well as charges accruing out of distribution losses (power leakages).

In October 2015, the state government had exempted the gas-based power plant from the above levies as the Union government sought to revive it under the Power System Development Fund (PSDF) announced in March 2015.

RGPPL was earlier exempted from all levies for a two-year period between April 1, 2015 and March 31, 2017. The current decision by the state government has been prompted by the Centre’s decision to achieve 100 per cent electrification in the country by 2019.

“The state government has taken the decision to mainly prevent the RGPPL-operated power plant from turning into a NPA for its lenders. This decision has also been taken keeping in mind, the national interest. For the revival of the project, each partner (stakeholder) will have to take up and fulfil some responsibility,” the order said.