No extra sops for big power projects

The finance ministry has turned down the power ministry's request to consider additional sops for developers of ultra mega power projects.

North Block has asked the power ministry to first test the market and get a valuation of the seven projects before seeking any sops.

The contention of North Block is that it does not want to adopt a piecemeal approach. "The power ministry has forwarded a list of demands made by the developers and financial institutions even before any valuations of the ultra mega power projects is available. Once the valuation is known, there could be a fresh list of demands. We want them to go to the market and test the waters before we consider any of their demands," an official said.

The list of demands included increasing the external commercial borrowings (ECBs) and floating infrastructure bonds to bridge the financial gap caused by the escalation in fuel costs for projects based on imported coal.

While the financial institutions had raised concerns about the size of these projects on account of the huge investments and likely problems in servicing their debt, the developers had raised issues regarding signing of the escrow account arrangement prior to the financial closure of the project, increasing the length of the bidding time line and confirmation of the relocation and rehabilitation package at the request for proposal (RFP) stage, among others.

The missive from North Block comes close on the heels of the Prime Minister's Energy Co-ordination Committee observation against special treatment of these projects. The committee noted that any special treatment should be justified by a defensible economic cost-benefit analysis.

The ECC was of the opinion that the fiscal and tax regime should be identical for projects across power and related energy sectors such as coal and gas.

It said the ultra mega power projects would introduce further distortions in the power sector.