Ipps, Fis Clash On Demand For Revenue

Strapped of escrow cover, independent power producers have adopted an aggressive posture seeking the first charge on revenues of state electricity boards. This has set off a virtual war between IPPs and financial institutions who have sought a similar facility.

IPPs, in several recent meetings with respective SEBs, are learnt to have asked for first charge on revenues even though cash-strapped electricity boards are bound by MoUs to pay back loans due to lenders like FIs and banks first and later to others like IPPs.FIs and banks find themselves in a piquant situation because some of them are lenders for both SEBs and IPPs.

 

It is learnt that officials of certain SEBs have called for a meeting with both representatives of both FIs and IPPs to discuss the issue so that power projects can take off without further delays.

The FIs have already expressed their willingness to fund power projects on the basis of state undertakings taking up power reforms by laying out specific milestones. This mechanism has been mooted as an alternative to escrow following a meeting between the power ministry and financial institutions like ICICI, IDBI and IDFC.

However, in case SEBs fail to complete any of the milestones, FIs would have the right to discontinue funding of the projects.

For example, in the case of Karnataka Power Transmission Corporation, the state electricity board, even budgetary support from the state government has dwindled over the years and hence it has been unable to pay dues to FIs and banks and to several central and state generating units.

The budgetary support from the State Government for KPTCL has dwindled from around 83 crore during 1995-96 to almost nothing, while the subsidy burden has increased to around Rs 1,223 crore during the current year. The cash subsidy from the state government too has declined from Rs 351 crore in 1996-97 to around Rs 85 crore in 1998-99.

The corporation has also been forced to borrow more each year. In 1997-98, it borrowed around Rs 324 crore, which went upto around Rs 646 crore and for the current year it has increased to around Rs 1,182 crore. The corporation's power purchase cost too has gone up. Five years ago, its purchase cost was around Rs 1,75 crore per annum, which has gone up to around Rs 3,036 crore during 1999-2000.