Commercial banks advancing working capital to State Electricity Boards (SEB), are opposing the concept of escrow, wherein IPPs get first charge on receivables of the SEB.
In states like Madhya Pradesh, escrow is the only form of guarantee that the IPPs have, thus putting these bankers at a risk.
The request, put forward by the State Bank of India, which is a major lender to SEBs for their working capital, has also been endorsed by other bankers.
At a meeting of the working capital bankers on September 2, they agreed upon an "inaccessible bottom" _ a percentage of the receivables that cannot be accessed by anybody else.
According to the banks, this "bottom" is necessary for the survival of the SEB. Without a functioning SEB, the IPPs have an unviable project on their hands, they claim.
This percentage of the receivables will be used to cover the working capital borrowings from banks. The banks charge a cover of 100 per cent on their working capital.
It will also be used to pay statutory dues of the SEBs like payments to National Thermal Power Corporation, government, salaries of employees, etc.
Although the percentage of receivables to be earmarked is based on the efficiency and cash flows of each SEB, states like Madhya Pradesh have prompted these banks to act on them first.
Currently, three power projects, Bina, Daewoo and Skumars, have been cleared in Madhya Pradesh.
The banks have conveyed their opinion to Indian promoters of IPPs and also to lending institutions. The Indian promoters have agreed in principle but are awaiting the approval of their foreign partners.
