Search the Internet          Tips  Sites: Finance, Investment

MoF may renegotiate DPC guarantee

Santosh Tiwary & P Vaidyanathan Iyer

The Union finance ministry is studying various options under which the counter-guarantee given to Dabhol Power Company (DPC) could be renegotiated. Ironically, it was the same 13-day old Vajpayee government which had cleared DPC's counter-guarantee, the first and only such given to any power project in the country.

Highly placed government officials told Business Standard that the finance ministry has sought the Cabinet secretariat's opinion on the possible options outlined by it (the ministry of finance).

The Cabinet secretariat has however asked the finance ministry to firm up its option which could then be taken up by the Cabinet, they said.

Officials said the ministry was in favour of introducing an alternate payment security mechanism in place of the counter-guarantee.

The government has already mooted an alternate payment security mechanism for the mega power projects under which the authorised capital of Power Trading Corporation (PTC) would be hiked to Rs 5,000 crore in the next five years for ensuring that there is no default on the payments due to private players.

PTC's current authorised capital is about Rs 1.50 billion, while its paid-up capital stands at Rs 240 million. The proposal to beef up PTC financial capability is expected to be taken up by the Cabinet soon, sources said.

The Maharashtra State Electricity Board-DPC payment tangle had taken a new turn recently with MSEB seeking adjustment of the "availability penalty" slapped by it on DPC. The law ministry, sources said, informed the ministry of finance that there was a case in MSEB's demand.

The "availability penalty" is a rebate given by DPC to MSEB if the company did not provide 90 per cent of the committed power and is adjusted on the latter's outstanding bills. MSEB had slapped a penalty of Rs 4 billion when DPC did not stick to its commitment on certain days between October 2000 and January 2001.

MSEB had hence sought adjustment of the penalty amount against the outstanding bills. MSEB recently paid the February bill to DPC "under protest". DPC had invoked the Centre's counter-guarantee for its December bill.

Meanwhile, DPC has today invoked the government of Maharashtra counter-guarantee for the January bills of Rs 1.27 billion, a company spokesman said.

Powered by

ALSO READ:
The Capital Markets Crisis

The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report