Bank body goes slow on putting power projects on fast track

After having met every month since it was set up in early 2004 to facilitate financial closure of private power projects, the inter-institutional group (IIG) on power, which brings together a clutch of banks led by the State Bank of India, has been on a "recess" for the last few months.

The group has so far helped achieve fast-track financial closure for 13 projects which will bring about 5,000 Mw on stream at an investment of about Rs 4.5-5 crore per Mw.

The average price of power from these projects will be about Rs 2 per unit. The 14th project "" the coal-based 1,000 Mw plant promoted by the Nagarjuna group at Mangalore "" is in the final stages of financial closure, as are another two.

However, "the IIG is nearing the end of the list of projects bankers are keen to fund," said an official associated with the group, and that explains the hiatus in meetings. There are about six other projects in the IIG's shortlist, for which the lenders have no appetite, largely because they are gas-based.

"There is no visibility on the availability or the pricing of gas. So there is apprehension," said a banker. The IIG has financed some gas-based projects but many of them are working below capacity, if they are working at all. "Gas was an issue which was proving intractable," said a Mumbai-based banker.