FIs drop escrow demand to fund power projects

NEW DELHI, MAY 16. The financial institutions including State Bank of India and Industrial Development Bank of India have agreed to fund private power projects based on reforms initiated by the States and have dropped the demand for escrow cover from the State governments, the Power Minister, Mr. P. R. Kumaramangalam, said here today.

``They have agreed to fund private power projects based on the reform progress made by the State governments and have dropped the demand for having an escrow guarantee before funding any of the IPP projects," Mr. Kumaramangalam told reporters soon after the crisis resolution group (CRG) meeting.

Instead, the financial institutions would have the first charge on the revenue accrued by the State electricity boards (SEBs) on the private project which would be used to service the debt of the FIs, he said.

The SBI chief, Mr. G. G. Vaidya, the IDBI chairman, Mr. G. P. Gupta, and the Industrial Finance Corporation of India chairman, Mr. P. Narasimham, were among the financial chiefs who attended the CRG.

``Funding for the IPP project would be done based on the States' pace of taking up the reforms," Mr. Kumaramangalam said adding a committee had been constituted to work out the milestones achieved by the States in taking up the reform process and also work out the revenue being generated due to such reform initiatives.

The financial institutions are interested in looking at a situation where adequate surplus is available with the SEBs to service the debts of the financial institutions, a top official with one of the FIs said.

If the cash surplus is available with the SEBs then the FIs would not demand escrow cover from the State governments, he said on conditions of anonimity.

Earlier the Centre and the Government of Madhya Pradesh signed a memorandum of understanding (MoU) with regard to the reform measures to be implemented by Madhya Pradesh.

Mr. Kumaramangalam said the FIs have agreed to fund the four IPP projects including Daewoo, Bina and Maheshwari power projects in the State on the reform based funding mechanism.

- PTI

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