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Balaji C. Mouli

NEW DELHI, Jan. 1

THE Finance Ministry has informally told the financial institutions (FIs) that it is not willing to offer guarantees to them to finance the remaining portion of the Dabhol Phase II project having a generation capacity of 1,444 MW and a five mmtpa LNG regassification terminal.

The FIs had earlier proposed to the Government for sovereign guarantees amounting to Rs 2,155 crore as one of the sacrifices on the part of the Centre to make the project competitive in the market place.

The Centre has also rejected another proposal from the Indian lenders for set off of customs duty paid on project equipment against future LNG imports.

The Ministry is, however, willing to look at offering tax-free status for bonds raised by the FIs to replace the rupee loans with the existing dollar loans.

With regard to absorption of power from the Dabhol project, the Centre and the FIs are lobbying with Maharashtra to accept a commitment to absorb half of the second phase of the project (722 MW) to begin with and ramp it up to the entire second phase in a period of five years, sources said. Meanwhile, the Centre is also looking at reallocating 1,400 MW of power from the National Thermal Power Corporation (NTPC) to the enable Maharashtra to pay for part of the Dabhol project.

The Finance Ministry is also looking at the FIs' proposal for waiver of minimum alternate tax (MAT). This would amount to a sacrifice of Rs 468 crore.

Meanwhile, both the Tatas and BSES Ltd are negotiating with Dabhol Power Company (DPC) to enter into a confidentiality agreement for conducting due diligence of the Dabhol project. While DPC wants to dispute resolutions on the agreement to be addressed in New York courts, the Indian companies are not willing to settle for any another forum besides the Indian courts.

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