FinMin turns down demand for ECB hike

The power ministry's demand to raise the external commercial borrowing limit for ultra mega power projects from the current level of $500 million a year has not found favour with the finance ministry.

The high-level committee on external commercial borrowings (ECB) policy, which functions under the finance ministry, has observed that the limit of $500 million under the automatic route per project seems to be sufficient, a senior government official said.

"Prima facie it seems that raising the current limit of $500 million (about Rs 2,250 crore) under the automatic route of ECB is not required for such projects," he said.

The committee, which met yesterday, has also asked the power ministry to quantify the amount needed above this limit for ultra mega power projects.

The projects would have an installed capacity of 4,000 Mw and would require an estimated investment of Rs 16,000 crore or about $4 billion. It would take four to five years to build these plants and a developer could raise $2.5 billion from ECBs during this period, the official added.

The projects are to be implemented in a debt-equity ratio of 70:30, which means that each of the plants would require a debt of about $2.8 billion. Moreover, they can also access ECB above this limit through the approval route. ECB is not the whole borrowing and such projects would be accessing other forms of debt, the official said.

The power ministry has been seeking liberalisation of ECB norms for ultra mega projects. The ministry has sought a separate dispensation under the approval route for financial institutions and banks to access ECBs to the extent of their participation.

At its meeting yesterday, the committee considered other cases including those that allow infrastructure lending agencies such as IDFC and Indian Infrastructure Financing Company Ltd to raise ECBs through the automatic route. The panel, however, did not take any decision in these cases.

According to the existing policy, financial institutions dealing exclusively with infrastructure financing are allowed to avail ECB after prior approval.

On the issue of treating public sector financial institutions differently from those of the private sector for raising ECBs, the panel felt the matter required further study and deferred a decision on it.