12 Power Projects Likely To Declare Financial Closure This

The Industrial Credit and Investment Corporation of India Ltd (ICICI) expects that around 12 power projects will achieve financial closure by the end of the financial year.

ICICI managing director and chief executive K V Kamath said that many of the glitches in the existing system which are constraining the financial institutions from lending are expected to be sorted out.

The government has reportedly assured the financial institutions that their concerns will be resolved shortly.

Kamath said the 12 power projects would entail an investment of around Rs 10,000 crore and lead to an increase in the installed capacity by around 3,600 mw. ICICI is involved in 20 power projects.

Some the foreign funds are also looking at the prospect of investing in Indian power projects.

Prudential Corporation group chief executive Peter Davis had said that the PIDA fund will be investing in a couple of power projects by this year end. Davis said that 30-40 per cent of the $1billion PIDA fund could be invested in India.

He said that the Indian economy offers real opportunities for long-term investment.

Kamath was of the view that the way projects in the telecom sector have taken off during the last one year, there is scope in the power sector too.

The financial institutions have some reservations while lending to power projects.

The inter-institution group headed by Industrial Development Bank of India (IDBI) examined issues pertaining to infrastructure sector. In its report the group wanted reform of the state electricity boards, reduction in tariffs, rationalisation of tariffs with tariffs reflecting the economic cost of supply.

They had suggested that the state electricity boards should move away from the two part tariff formula which is a cost plus approach to competitive bidding process which will be more transparent.

They had also suggested measures for credit enhancing which would reduce the credit risk of the state electricity boards and had pitched for an integrated fuel policy which would lead to the development of a bankable fuel supply agreement which can be executed.

The group had suggested that state electricity boards should identify stand alone power projects which are partly implemented but stuck because of lack of funds and open them for private sector participation.