North Block riders for Dabhol cover

The finance ministry has refused to issue a $230-million government guarantee for settling the dues of Dabhol power project's foreign lenders until all the 17 foreign banks issue comfort letters assuring withdrawal of each and every pending case.

Officials involved with restructuring the project told Business Standard today that multinational banks ABN Amro and ANZ were the only foreign lenders that had still not issued the letters.

This, they said, was holding back the guarantee. The two financial institutions have sought an additional amount to settle their dues with Indian lenders.

The finance ministry had sought the comfort letter as an interim measure till the final settlement agreement was signed.

A guarantee from the Centre is crucial to Indian lenders' plans of floating 20-year bonds to raise funds for the settlement.

The lenders "� IDBI Ltd, State Bank of India, ICICI Bank and IFCI Ltd "� have floated a special purpose vehicle for settling the dues. The SPV will issue the bonds, which will be subscribed to by the Life Insurance Corporation of India.

"The government does not intend to issue a guarantee till the comfort letter is received since we have already burnt our fingers once. We are hopeful that the issue will be resolved in a few days as Indian lenders are negotiating with the two remaining entities," an official said.

Restructuring and revival of the Dabhol project was discussed by a committee headed by the Cabinet secretary on Monday. The meeting was also attended by Indian lenders.

Officials said the lenders had not approached the Centre for a guarantee to issue bonds for settling GE's and Bechtel's dues. They have settled the dues for an amount of $305 million.