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Maharashtra, MSEB refuse to adhere to lenders' conditions

The Maharashtra government and the Maharashtra State Electricity Board have firmly refused to adhere to 'any conditions', including providing an escrow cover and raising the limit under letter of credit to Enron's Dabhol Power Company as per the latest demand by its global and domestic lenders.

In a seven page response to Union finance secretary Ajit Kumar, dispatched on Sunday, the state has categorically ruled out 'towing the line' to an array of 'diktats' by the lenders and presented the validity of its point distinctly, a senior state government official said.

In the letter dated May 1, the consortium of banks -- ABN Amro, Credit Suisse First Boston, Citibank N A, ANZ Export Finance Ltd and Bank of America -- and IDBI have asked for payment of the disputed Rs 2.13-billion December and January bills, an escrow cover, increase in the letter of credit amount and that 'henceforth' the counter guarantees and its obligations in the power purchase agreement be honoured.

"We have made it 'crystal clear' to the Centre that we cannot pay the December and January bills as the matter is now under arbitration," the government official said.

"So long as DPC's political force majeure remains activated, we will not provide the escrow or even hike the LC limit as well," he added.

He said both the state and MSEB have been surprised by the financial institutions' belief that the board's Rs 4.01-billion penalty on DPC was 'frivolous' and should be withdrawn.

"This is a biased view endorsed by the DPC which is not even ready to recognise the penalty," he said.

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