Power majors disagree, projects get stalled

Two transmission projects of Rs 5,800 crore, to be executed through public-private partnerships, have been held up due to a disagreement between the partners "" Powergrid Corporation of India Ltd and Reliance Energy Ltd.

The Rs 800-crore Parbati-Koldam transmission line project in Himachal Pradesh and the Rs 5,000-crore Western Region Strengthening Scheme have been held up on the issue of the provision for a "buyout" by one of the partners if the project fails to take off.

Powergrid is refusing to take on the liability of buying out the private partner (in this case, Reliance Energy) if the projects fall through during the construction or developmental stage.

It wanted to be just an equity partner, a Powergrid executive said.

The government and public sector utilities can form joint venture companies with private entities, subject to there being no contingent liability in the joint venture other than equity participation.

In June 2005, Powergrid selected Reliance Energy as its joint venture partner for the Parbati-Koldam project. Reliance Energy was to hold a 74 per cent stake and the remainder would be with Powergrid. However, the joint venture agreement has not yet been signed, since Reliance Energy wants Powergrid to take on the buyout liability.

Reliance Energy, however, denies having received any official communication from Powergrid on the buyout clause. The signing date currently stands postponed to April 10, 2007.

The western region project has been stalled because Powergrid has not yet notified the lowest bidder. "The issue is the same "" the buyout clause," said the Powergrid executive.

The transmission project aims to replace and lay new lines and construct new sub-stations in southern Maharashtra and Gujarat.

"We are not even aware of this," said a Reliance Energy executive. Reliance Energy claims to have received over a dozen letters from Powergrid, seeking postponement of the signing date, with no reason stated.