Mp To Offer Escrow Cover In Lieu Of Lower Tariffs
The Madhya Pradesh government has asked independent power producers (IPPs) in the state to rework power tariffs for getting escrow cover. This is the first time that a state will be "auctioning" escrow cover to independent power producers for low tariffs. The state government has laid down certain criteria for arriving at the power tariff based on which it is going to shortlist projects with lowest tariffs totaling 2561 mw of capacity.
On a suggestion by Union power minister P R Kumaramangalam, the state government has asked 13 IPPs in the state to revise their power tariff schedules for bagging the limited escrow cover the state electricity board has to offer.
As per conditions laid down, the state government has not only asked the promoters to revise their engineering, procurement and construction (EPC) costs, but has also asked them to incorporate the new tariff conditions laid down in the June 9 notification issued by the Union power ministry.
Under this, the government has eliminated profits on operating norms _ station heat rate and auxiliary consumption _ and has withdrawn permission to pass on income tax to the tariff charged from state electricity boards.
Other criteria laid down by the state government include inflation rate, present and future interest rates, exchange rates and the foreign exchange component in the project.
Apart from this, the state government has also stipulated that shortlisted IPPs will have to deposit 2 per cent of the project cost with it as commitment charges and achieve financial closure within a month of the award of the escrow cover. It said the state would retain money from projects that are unable to reach financial closure in the specified time.
The move to "auction" escrow cover follows the impasse between the state government and financial institutions over how much escrow cover the state can provide. The state government had earlier this year shortlisted six projects totaling 3,000 mw for escrow cover but was shot down by financial institutions that felt its escrow cover limit was 2,561 mw. The state government has 7,000 mw of private power projects in the pipeline, of which 4,500 mw have attained all levels of clearances but cannot enter financial closure until the state government allocates escrow cover.