Fis Agree To Scrap Escrow

Financial institutions yesterday agreed to drop the escrow cover requirement for funding private power projects. Instead, they will base their funding plans on reforms undertaken by state electricity boards.

At a meeting between the FIs and the power ministry, it was decided that the FIs would now have the first charge on the electricity boards' revenue accounts.

Later, power minister P R Kumaramangalam told reporters that states would have to work out reforms milestones to assure the FIs about the boards' financials.

The meeting, chaired by Kumaramangalam, was attended by Power Finance Corporation chairman Uddesh Kohli, IFCI chairman P V Narsimhan, IDBI chairman G P Gupta and SBI chairman G V Vaidya, besides ICICI and IDFC representatives.

The minister informed that a special committee would be set up to assess whether the net revenue increase at each stage matched the level agreed on by the states and the FIs.

The FI representatives said the SEBs would have to create adequate surplus for debt-servicing. However, the first charge on the SEBs' revenue accounts will be limited to the debt-servicing requirement.

The minister said in cases where corporations like PFC already had the first charge, the banks and FIs concerned agreed to work out an alternative route.

What's more, the FI executives said promoters would have to bring in their equity upfront in order to assure the financiers of the promoters' financial strength to execute capital-intensive projects.

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Life after escrow

* The first charge will cover only debt-servicing

* SEBs have to work out milestones for reforms to get FI funding

* Special committee set up to monitor reforms and increase in revenues

* FIs to ask promoters to bring in equity upfront