FIs won't seek guarantees for power projects

In an attempt to expedite the financial closure of power projects, banks and institutions lending to the sector agreed not to insist on government guarantees as a pre-condition for funding them.

The move is expected to assist projects, including the BPL-promoted 520 Mw Ramagundam project in Andhra Pradesh and the Torrent group's 1,000 Mw project in Gujarat.

At a meeting today with key stakeholders, the power ministry also identified 25 projects, with a potential to generate around 8,000 Mw, that have a chance of tying up funds in the near future.

Of these, some can achieve financial closure within the next eight weeks. According to power ministry sources, these include six independent power projects in Andhra Pradesh.

Financial institutions today agreed to decide the merits of financing power projects on parameters like the record of the promoters and commercial viability including tariff, instead of insisting on upfront guarantees, a power ministry official said.

The meeting, chaired by Power Secretary R V Shahi, was attended by S Narayan, the prime minister's economic adviser, State Bank of India Chairman A K Purwar, Power Finance Corporation Chairman A A Khan, secretaries of several energy departments, state electricity boards as well as promoters of various projects.

Today's meeting comes close on the heels of a meeting of independent power producers convened by the power ministry last month, where it was decided that the financial closure of projects with tariffs in the Rs 2-2.5 per unit range was to be expedited.

Besides the six independent power projects in Andhra Pradesh, the others taken up at the meeting included the Torrent group's project in Gujarat and the Jindal group's 500 Mw thermal station in Chhattisgarh.

The power ministry will also set up a cell to monitor daily the progress of these projects and to lend assistance to their developers.