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No further financial counter-guarantee for power projects: Prabhu

Union Power Minister Suresh Prabhu has said the government will not provide further financial counter-guarantee for huge power projects like the one that helped Enron finance its controversial Rs 3-billion dollar power project in Maharashtra.

Payment guarantees, such as the ones India granted for Enron's power project, ''discourage'' reforms by letting state officials think that they can get additional power without cleaning up their electricity boards, Prabhu was quoted as having said in an interview published in Monday's edition of The Wall Street Journal.

Power industry officials, however, say the counter-guarantees are needed to get big projects financed, the report said, noting that southern company of Atlanta and CLP Holdings of Hong Kong are among the companies still hoping to help build new plants in India.

Prabhu said state governments should allow generating companies to distribute power directly to multiple consumers.

Enron's project, Dabhol power company, has a single customer-- the state of Maharashtra-- whose payments are guaranteed by the central government.

Prabhu said India will not ''default'' on its obligations after Dabhol invoked the central government's guarantee in January and again in February when Maharashtra was unable to meet its payments schedule.

At the same time, the minister said, the government is awaiting resolution of a contract-performance dispute between Maharashtra and Enron before sending the funds Enron is demanding.

Prabhu also touched upon the power ministry's predictions of an imminent financial closure of a slew of private power projects totalling more than 6000 megawats, which still remain on hold. ''They'll happen, but now I am not not giving a deadline,'' he said.

Prabhu said the government was preparing a new policy intended to help the viability of small ''captive'' power plants by allowing them to sell extra power to state-controlled electricity boards.

The move, intended to give a push to small plants supplying electricity to single customers, is seen as an opportunity for foreign companies with small-engine technologies to gain an edge on power plants in an electricity starved market like India.

State government will be persuaded to free the capitive power plants to compete with electricity boards for industrial customers, he said, adding that central financial aid will be used as an incentive. ''Electricity boards cannot capture customers at gunpoint,'' he said.

Captive plants is reported to account for Ten per cent of India's power capacity. While Bharat Heavy Electricals Limited (BHEL) dominates the market, foreign firms such as Cummins of the US, Germany's Siemens and France's Alstrom are also trying to gain an entry.

Prabhu is of the view that captive plants could help solve India's immediate power shortages. ''If their unused power were put on the electricity grid, India could gain 10 per cent more total capacity," he said.

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