Search the Internet          Tips  Sites: Finance, Investment

Dabhol willing to cut tariffs by 10%

BS Banking Bureau

Dabhol Power Company managing director K Wade Cline has told domestic lenders that the company is ready to cut tariffs by 10 per cent.

"The DPC managing director met me recently. He is agreeable to cutting the tariff by 10 per cent. I am sure it can be reduced even further," IDBI's acting chairman-cum-managing director S K Chakrabarti said on Monday.

IDBI, the leading Indian lender, has a Rs 21.58 billion exposure in the project, including Rs 6.30 billion worth of term loans and Rs 15.28 billion worth of guarantees. Ruling out a cut in interest rates to bring down tariffs, Chakrabarti said the "promoters should take a cut... the 16 per cent post-tax return (on investment) is quite high."

IDBI executive director RS Agarwal, who is on the DPC board, said the cost of power was not crucial. "We are more concerned about who will buy the power. If the issue of offtake (of power) is sorted out, there will not be any problem," he said. The project has a capacity of 2,144 mw.

The domestic lenders have formed a panel to chalk out a strategy to counter their foreign counterparts. The panel headed by Agarwal is meeting on May 30, ahead of the global lenders' meet in Singapore on June 5-6.

"The meeting will discuss strategy to put pressure on the foreign lenders so that they do not precipitate the crisis by invoking the accelerable guarantee clause," Chakrabarti said. He admitted that there is a rift between the foreign and domestic lenders.

Senior executives of ICICI, Industrial Finance Corporation of India and State Bank of India are on the domestic lenders' panel. The Indian lenders had a collective exposure of Rs 66 billion. However, after part repayment on the phase I loan, the outstanding exposure has come down to around Rs 52.50 billion.

Chakrabarti said there was no question of default in payments now as DPC could pay loan instalments at least for another six months.

Since most of the foreign lenders to whom the guarantee facility was offered are export credit agencies -- and not commercial banks -- the IDBI chief is hopeful that they will not pull the plug and invoke the accelerable guarantee. "I am hopeful that nothing of this sort will happen," he said.

He said the lenders will not lose money in the deal. "DPC is a company with unlimited liabilities and all its shares are pledged to the lenders. All assets are also mortgaged to the lenders. We will recover the money," he said.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report