Will Govt. give in to pressure on escrow cover?

By Divya Sreedharan

BANGALORE, SEPT. 3. The controversial Mangalore power project may force the State Government to backtrack on its ``no escrow'' stand. The Government's refusal to provide escrow cover for the project is apparently hampering its progress. In fact, the promoters of the Mangalore Power Company (MPC), the Hong Kong- based China Light and Power (CLP), and Tata Electric are said to be ``unwilling to go ahead'' with the way things are at present.

The Government's stance on escrow cover - which is in effect a security blanket or a government-held fund which assures power suppliers that they will be paid on time for the power supplied - dates back to the days when MPC was promoted by Cogentrix and CLP.

In December last year, the State Cabinet categorically opposed MPC's escrow demand. Following that, MPC stopped its work on the $1.3 billion 1013 MW thermal power plant at Nandikur in Mangalore. The Cabinet accepted the Deepak Parekh committee recommendations (against providing escrow cover keeping in mind the State power utility's dire financial conditions) in January. But, later, a High Court directive obliged the Government to provide escrow for the 220 MW Tannir Bhavi power project.

The Centre is said to have already turned down Karnataka's proposal of counter-guarantee without an escrow for the MPC project. Instead, it has suggested that escrow be put in place 90 days before actual operations commence.

Questioned on the issue, the Principal Energy Secretary, Mr. P.S.S.Thomas, admitted that the State was, at the moment, having discussions with the Centre.Would the Centre's recent decision to review all power projects in the States have implications on MPC? Mr. Thomas pointed out that the review was meant to examine the ``progress of the projects'' and would not impede the MPC in any way.

Mr. Thomas stressed that the final decision would not be Karnataka's alone. ``It has to be a combined decision by the Centre and the State''.

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Section  : Southern States
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