The extension of counter-guarantee by the Union government to the Dabhol power project has hit the other fast-track power project in Maharashtra: Bhadravati. The Centre has refused to offer full counter-guarantee to the Bhadravati project.
Under the general parameters of counter-guarantee, the Union governments total exposure in a state cannot exceed the sum total of the central plan assistance and the share of central taxes transferred to the state in the preceding financial year.
Since the government has already extended the counter-guarantee to the Dabhol power project, the cover available to the Bhadravati project will be limited to the maximum of the total of the central plant assistance and the share of central taxes transferred to Maharashtra in the preceding financial year (of issuing the counter-guarantee) minus the exposure already allowed for the Dabhol project.
The Centre has conveyed to Ispat Group, which is promoting the 1,082-mw coal-fired Bhadravati project in association with GEC of the UK and EDF of France, that the general parameters of counter-guarantee allow it to extend only a limited guarantee to the project.
In the absence of the full counter-guarantee, foreign lenders and export creditors are refusing to extend funds for the project.
The governments high-powered board is meeting in New Delhi today to discuss the issue.
The Maharashtra government, which is keen to increase the power generating capacity of the state, has suggested that the Centre should take the special central assistance received on account of externally aided projects and Central Sector Plan schemes into consideration for the purpose of extending the counter-guarantee.
Alternatively, according to the Maharashtra government, in case there is an occasion of invocation of the central counter-guarantee, the amount that remains unmitigated during the year after exhausting the full balance of state share of tax and central plan assistance, could be carried forward to the subsequent year to be adjusted against the states share of tax and central plan assistance payable in that year.
The Maharashtra government has also sought relaxation in the condition that on termination of the project, the counter-guarantee would cover only payments restricted to the outstanding foreign debt which is further restricted to foreign equity. The state has suggested that the counter-guarantee should cover the entire outstanding foreign debt without restricting it to the foreign equity.
