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FIs cancel loans to 5 power projects

S Ravindran

The financial institutions have pulled the plug on five power projects with a total investment of Rs 159.90 billion.

The institutions led by the Industrial Development Bank of India and ICICI have decided to cancel the sanctions to these power projects that envisaged a total power generating capacity of 3,079 mw.

Leading the pack in terms of sheer size is the 1,050 mw North Madras power project promoted by the Videocon group. Also included in the casualty list is the Reliance-promoted 447 mw Patalganga project in Maharashtra.

The other projects whose sanctions have been cancelled include the RPG group-promoted 500 mw Balagarh project in West Bengal; the BPL group promoted 520 mw project in Andhra Pradesh and the GVK group's 562 mw project at Goindwal Sahib, Punjab.

"We decided to cancel the assistance as the sanctions have lapsed quite sometime back and there has been little or no disbursement. There is very little prospect of these projects coming up in the near future. Further, a host of parameters like the cost of the project have changed since we sanctioned the amount and it makes no sense to continue with the sanctions," senior institutional officials said.

They, however, made it clear that this was not the end of the road and fresh requests for sanctions could be entertained later.

This is the second time this year that the institutions have resorted to cancellation of loans of such magnitude. Earlier, FIs had cancelled loans to 10 power projects entailing an investment of Rs 163.06 billion and totalling 3,657 mw.

The biggest casualty last time round was the 1,070 mw Daewoo promoted project at Korba in Madhya Pradesh.

Reliance's Patalganga project has been hit by the Maharashtra government's policy of keeping all other private power projects on hold till a solution is found to the Dabhol problem.

In an e-mail response to a query, the Reliance spokesman said: "Due to the developments related to the Dabhol project, the Maharashtra government has decided to keep all the other power projects in the state on hold for the time being. In view of this, Reliance has taken appropriate steps and had informed financial institutions that funds are not required currently for the project."

But the sorry state of affairs in other power projects is a direct fallout of the poor health of the state electricity boards, the sole buyers of the power produced by these projects. Without payment security mechanisms in places, the promoters of these projects have dragged their feet over starting construction work.

The Tamil Nadu Electricity Board, for instance, cancelled the escrow account allotted to the Videocon project, creating funds problem for the project.

The UK-based National Power, the Videocon group's partner, walked out of the project after the project failed to take off.

Recently, US-based Mirant Corp exited the Balagarh project and the 3,960 mw Hirma power project citing inordinate delays on the part of the government in achieving certain milestones. The Hirma project too is promoted by the Reliance group.

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