Independent power producers (IPPs) have urged Madhya Pradesh to consider forex variation liabilities of 8 to 10 per cent annually instead of the 4-5 per cent. This would act as a level-playing field among IPPs competing for escrow cover in the state. The Madhya Pradesh government recently asked 13 IPPs in the state to cut their power tariff schedule for getting escrow cover. Financial institutions have indicated an escrow cover limit for 2,561 MW in the state. Of the 7,000 MW of power projects proposed in the state, 4,500 MW are at various levels of attaining financial closure.
The financial institutions have told the state government they will fund projects up to 2,561 MW in the state for escrow cover. The remaining projects will be devoid of escrow cover. To avoid this situation, the MP government had asked the promoters to lower their project cost. According to the policy announced on June 9, the two-part tariff guarantees a 16 per cent return on equity in forex terms.