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May 1, 2001
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Money > Business Headlines > Report May 1, 2001 |
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Loss-wary FIs ask govt to defuse Dabhol crisisTamal Bandyopadhyay Indian lenders to Dabhol Power Company, led by the Industrial Development Bank of India, have asked the Centre to honour its counter-guarantee and pay Rs 1.02 billion for the December 2000 bill immediately, to end the impasse over the $3 billion Dabhol Power Company project in Maharashtra. In a letter to finance secretary Ajit Kumar despatched on Saturday, the domestic lenders said the Centre must immediately step in to defuse the crisis and save them from posting irreparable losses if Enron walks out of the project. This is possibly the first instance of onshore lenders moving the finance ministry to save a project. "This is unprecedented. As a last-ditch attempt the financial institutions are putting pressure on the Centre to save the project and their money," said a source in the ministry. The lenders suspect that DPC may eventually declare itself bankrupt as the company had hinted at roping in a bankruptcy lawyer at last week's meeting in London against the backdrop of the Maharashtra State Electricity Board having defaulted on its payments. "The MSEB's payment of Rs 1.34 billion 'under protest' has not helped its cause much as DPC will classify the payment as a 'contingent liability' in its balance sheet and may declare itself insolvent if MSEB continues to pay up this way," pointed out an institutional source. At the London meeting, the "bankruptcy law" issue was raised, even though DPC did not clearly spell out its future course of action on this. The Indian lenders persuaded DPC not to go ahead with its proposal to terminate the power purchase agreement against the stiff resistance of the foreign lenders. But they have merely bought a three-week reprieve. "In case the issues are not sorted out within three weeks, the situation may worsen as the EPC contractor Bechtel may pull out if DPC fails to pay up. The EPC contractor may serve the pull out notice in June. The government must resolve these issues on a war-footing," said another source familiar with developments. The lenders' letter to the finance ministry has listed a host of issues, ranging from the delay in giving technical clearance for pollution control to DPC, to honouring the Centre's as well as the Maharashtra government's counter-guarantees. It has categorically said if the project fails, both foreign and Indian lenders will take a hit. The list of Indian lenders includes ICICI, Industrial Finance Corporation of India and State Bank of India, besides IDBI which is the leader of the syndicate. They have disbursed around 80 per cent of the debt for phase II of the Dabhol project which is slated to be completed by December this year. YOU MAY ALSO WANT TO SEE:
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