MP guarantee to power project

As a last-ditch effort to revive and avoid litigation on the 400 MW Shree Maheshwar hydel power project, the MP government has offered a conditional counter-guarantee to the project.

According the Kailash Chawla, minister for commercial tax and industries, "The Cabinet has decided to offer a conditional counter-gurantee of Rs 400 crore in favour of the Power Finance Corporation, which is offering a guarantee on optionally convertible bonds proposed by Shree Maheshwar Hydel Power Ltd. The government has put a condition on the guarantee that the company will have to repay the dues of the Madhya Pradesh State Industrial Development Corporation, which have reached Rs 39 crore."

The state government is in a dilemma since it can neither abandon it nor hand it over to the Narmada Hydroelectric Development Corporation (NHDC, a joint venture of the National Hydroelectric Power Corporation and the Madhya Pradesh government) since a "huge amount of the company" has already been invested in the project.

The work on the project has been stalled after its foreign partner Ogden pulled out though it had promised an equity participation of Rs 330 crore.

Since the project had been pending the last 13 years and the state government wanted its earlier completion, an amicable solution was the better option, said the minister.

To a question as to why the state government is not interested in handing over the project to NHDC, Chawla said, "the state government had invested an amount of Rs 18 crore in 1986 in the project and the company has also invested a huge sum in it, both the parties are interested in completion of the project to avoid the sheer wastage of investment. Handing over the project to NHDC may attract litigation."

However he ducked a question on expected power tariff from the project, which according to state govenrment, is expected to be completed in 2009-10. Experts had told BS, "the power tariff will not be less than Rs 7 per unit, even work starts on the project right now."

On number of occasions, the chief executives of Narmada Hydroelectric Development Corporation have expressed their interested in taking over the project provided a request must come from the government.

"We will be able to complete the project in 30 months if asked," SK Dodeja, Chief Executive of NHDC had told BS earlier.

The minister also clued the promoters have demanded a time of three months for financial closure for the project that would now cost more than Rs 2,255 crore Maheshwar power project.

He also hinted, "the PFC and Central Energy Commission have asked the company to alter its existing management and appoint professional and experienced people from hydel power sector to speed up the process on the project."