Minister Rescues Bhadrawati Project

A last-minute intervention by Union power minister R Kumaramangalam on Friday night cleared the way for the signing of the counter-guarantee for the Mittals-promoted Bhadrawati power project in Maharashtra. The power ministry will now move a cabinet note which will allow the Centre to deduct dues towards central PSUs such as NTPC/NHPC from the centrally devolved resources.

But for this change, the IPPs would have faced the risk of not being able to draw on the escrow guarantee in the event of a default BY a state electricity board. PSUs like NTPC and NHPC automatically have a first charge on the SEB's receivables, if they are not paid for two consecutive months.

 

This was not acceptable to the promoters and forced a stalemate on the counter-guarantee issue. The promoters wanted this clause to be dropped before the counter-guarantee was issued.

Officials in the Prime Minister's Office were requested to speak to the power minister to resolve the issue. Eventually, a solution was struck wherein the government agreed to rework the norms for recovering dues in the event of a default by an SEB. The Centre was unwilling to give up this right but later decided that in states with counter-guaranteed projects, it would cut dues towards the PSUs from the annually devolved funds in the event of a default by the SEB. Through this move the promoters of the $1.4 billion power-cum-captive coal project were assured of their risks being covered in the event of a state electricity default to meet their escrow requirements in time.

The Maharashtra government, however, refused to sign the tripartite agreement (between the promoters, the Centre and the state government) as they felt that there was no rationale in singling out one state for deduction of dues towards PSUs through the Central devolution fund.

The signing of the counter-guarantee was under threat till Friday as the state government refused to ink the pact. The Centre, however, assured the state that this condition will be applicable to all states once the Union cabinet gives its approval. Kumaramangalam will take this proposal to the cabinet shortly. On this assurance, the Maharashtra state government agreed to sign the tripartite agreement for the counter-guarantee, but insisted that the same rules should be applicable to all states.