Us Investors In Power Told Not To Seek Central Guarantees

Sue the state governments, if necessary, but dont ask for Central government guarantees to back private sector power projects, a senior power ministry official told foreign investors here.

No country can or has given counter-guarantees in large numbers, Pradeep Baijal, additional secretary in the power ministry, said firmly, ruling out any form of central guarantees.

Instead, Baijal, who is here as part of a delegation led by cabinet secretary T S R Subramanian to seek infrastructure investment, advised prospective investors to resort to the legal system, if necessary, to recover unpaid dues from the state electricity boards (SEBs).

You can sue the governments (state), they have enormous assets, and recover what they have promised to deliver, he said, urging investors to trust the workings of the legal system.

 

In a frank presentation, the senior power ministry official said it was clear that the non-viability of the SEBs was the basic problem plaguing the power sector. He pointed out that the SEBs were forced to sell power to most sectors at rates that were well below cost largely because of political considerations.

But he predicted that tariffs would rise slightly in response to the changing market conditions. Things will adjust, he said.

Senior government officials in the delegation have been emphasising both the problems and promise of investing in the infrastructure sector in the Indian economy. In the power sector, officials pointed out that the countrys huge demand could not be fulfilled by public sector investment alone.

Indias need-based requirement in the current Plan period is estimated at 57,000 mw, which would require an outlay of $55 billion. In the last plan, the country added just 18,000 mw compared to a target of 38,000 mw. Said a Jardine Fleming report on the sector, The demand-supply gap at the base level during fiscal 1997 was 10.09 per cent and is expected to mount to 13 per cent by the turn of the century.

In a bid to attract desperately required foreign investment, the government is promising returns of between 15 and 20 per cent in the power sector for private entrepreneurs.