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No more counter guarantee to power projects, says Prabhu

The central government has ruled out any counter guarantee to power projects even as foreign investors are approaching government expressing apprehensions in the wake of the dispute between Enron-promoted Dabhol Power Company and Maharashtra State Electricity Board over the cost of power and payment of bills.

"I will not say that they (foreign investors) do not have any apprehensions. They want to know about the fate of their projects. We are making it clear that our policy is transparent and unambiguous and we want foreign investment to supplement domestic investment," Union Power Minister Suresh Prabhu said.

"I have told all foreign investors that counter guarantee is out of question. Success of any project is through making it commercially viable," he said.

Prabhu clarified that any kind of central guarantee would not put pressure on the state electricity boards and commercial success of the projects would depend on making the SEBs financially strong and viable.

He, however, promised all the central help in working out a sound payment mechanism for the power projects to assauge the fears of both foreign and domestic investors.

Centre had yesterday paved the way for sale of power from DPC to other states by directing Central Electricity Authority to talk to power deficit states as DPC, which is promoting a $3 billion power project in Maharashtra, had agreed to bring down the cost of power.

Prabhu, however, said that an alternate security mechanism would be worked out keeping in mind the interest of investors and lenders but reiterated that it would not be in the shape of any guarantee from the Centre.

He said the government was keen to get foreign direct investment to supplement domestic investment and was putting the policy in place for the purpose.

Asked whether government was prepared for any worse outcome in terms of FDI, Prabhu said: "Our planning involves participation of FDI in a big way. But we are also prepared for the worst and preparing a contingency plan."

He, however, exuded confidence in getting the FDI as various countries have shown keen interest in India's power sector.

Some of the mega power projects include Hirma 3,960 MW with an investment of $4.5 billion and Ennore LNG project in Tamil Nadu of 1,850 MW involving an investment of about $2 billion.

Prabhu said that commercial viability of project can come only if the SEBs are made viable and the government was in the process of putting a policy in place.

He also said that Montek Singh Ahluwalia group was likely to give a report on the restructuring of SEBs soon which would also help in making the electricity boards financially stronger and viable.

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