However, the DPC, which will require an annual volume of 1.2 million tonne of naphtha, has been lobbying for the sops as it has been directed by the Union petroleum ministry to procure naphtha within India and not from any foreign agency. Mantralaya sources told The Financial Express that at present, the file in question is being processed by the principal secretary (finance) Anupam Dasgupta. "It is very difficult to exempt the DPC from the payment of sales tax especially when the state is looking for various avenues to mobilise additional resources," a senior minister said. He added, "However, the final decision in this regard will be taken only after taking into confidence the constituents of the Democratic Front (DF) government who have been demanding the cancellation of Dabhol phase-II."

On its part, the DPC has told the government that if the sops do not come about, it will be left with no alternative but to pass on the additional cost to the loss-making Maharashtra State Electricity Board (MSEB). The DPC, which had procured nearly 1.2 million tonne of naphtha during the calender year 2000 from Glencore, was not supposed to cover sales tax on the imported naphtha. Glencore had lowered the premium from $18.37 per tonne during 2000 to $16.87 per month per tonne in the current calender year. The premium includes transportation costs, insurance, overheads and other costs.

However, IOC has been demanding that its naphtha price should match the landed price of import. MSEB sources said that the DPC would have to procure naphtha at $243.53 per tonne comprising sales tax of $12.42 per tonne. At the Mean of Platt AG (MOP), naphtha cost has been assumed at $170 per tonne. However, with the addition of a premium of $16.87 per tonne, 22.8 per cent of duties and sales tax and port charges of $3, the final cost excluding sales tax would be $231.21 per tonne.

In the event of the DPC's decision to pass on the additional cost to MSEB, the latter would have to bear an additional burden of Rs 3.5 crore for the monthly procurement of 60,000 tonne of naphtha. "IOC has made it categorically clear that it was not able to absorb the additional burden," MSEB sources said and added that it has requested the state finance department to sanction sales tax exemption. The DPC, which had already signed an agreement for the supply of naphtha during this calender year with Glencore, has conveyed its inability to fulfil its commitment in the wake of the Union ministry's directive to procure it from India where naphtha production is in excess.