The IDBI-led consortium of domestic lenders, with exposure in the $3 billion Dabhol power project, has got the approval from the Centre to raise Rs 720 crore (Rs 7.20 billion) through tax-saving bonds for restarting the idle project.

IDBI had approached the government for permission to mop up about Rs 5,000 crore (Rs 50 billion) through such bonds over the next couple of years. Allowing domestic lenders to raise money is part of the government's strategy for operationalising the project.

This involved the de-dollarisation of offshore lenders' debt of $1,044 million and its takeover by domestic financial institutions by floating a special purpose vehicle, following which the domestic lenders could go in for private placement of bonds at low interest rates, sources said.

The proceeds from the bond issue will be channelled towards the funds required to restart the 740-Mw first phase of the project.

The Reliance Group is already in advanced negotiations with key stakeholders in Dabhol Power Company, including GE, Bechtel and the US agency, Overseas Private Investment Corporation for taking over the project.

The government had recently appointed a high-powered committee, comprising former Indian Ambassador to the US Naresh Chandra and Adviser to Finance Minister Vijay Kelkar, to sort out the mess and ensure a speedy restart of the plant.

According to officials, both GE and Bechtel, which hold 10 per cent each (with investment of $120 million each) in DPC, have agreed not to make a prior resolution of equity claims a requirement for their support to restart phase I and complete phase II (1,444 Mw) of the project.

IDBI, along with ICICI, the State Bank of India and other banks have a total exposure of about Rs 6,200 crore (Rs 62 billion) in DPC.

GE and Bechtel would complete their commercial contracts upon payment of Rs 650 crore (Rs 6.50 billion) as fee and continue as suppliers to the project, the consortium was not averse to buy them out and settle their equity claims, the sources said.

The company was also independently pursuing with Opic to take over the 65 per cent stake held by the beleaguered Enron through Enron Mauritius in the $3 billion project, they added.

DPC ran into trouble after Enron pulled out of the $2.9 billion project when the state government refused to evacuate the high-cost power offered by the project to the Maharashtra State Electricity Board.