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Escrow cover for IPPs -- Uproar in Karnataka over

Parekh panel proposals

Boby Kurian

BANGALORE, March 7

THE report of the Deepak Parekh Committee, set up by the S.M. Krishna-led Congress Government, to look into the escrow capacity of Karnataka Power Transmission Corporation Ltd (KPTCL), has run into rough weather, with a section of the Congress urging the Chief Minister to reject the committee's recommendations.

The Parekh committee, in its report submitted to the Chief Minister last week, had recommended that KPTCL should not extend escrow cover for IPPs. The committee was set up on December 6, 1999, following adverse reports on KPTCL's financial position.

The former Karnataka Chief Minister, Mr. M. Veerappa Moily, who sent a dissenting note to Mr. Krishna, told Business Line that even financial institutions such as HDFC, IL&FS or IDFC would not fund IPPs without escrow cover.

``Are they ready to finance IPPs without escrow? If they are agreeable, then the recommendation of the Parekh committee on escrow can be accepted or it will have to be rejected outright,'' Mr. Moily said.

``When Karnataka is vying for the top slot in the industrial map of the country, accepting the report of the Parekh committee would make the State beat a retreat from industrialisation,'' he added. ``TNEB has already given escrow for 2,000 MW and is prop osing to give another 2,000 MW. Other States such as Kerala and Andhra Pradesh are taking steps to privatise electricity generation. And escrow is going to be crucial,'' he claimed.

As per the projection of Parekh committee, 3,000-3,500 MW of power is required by the State in the next five years. Out of this, Karnataka Power Corporation Ltd expects to add 1,012 MW at an investment of Rs. 3,442 crores. Central units are expected to a ccount for an additional 800-850 MW, adding up to a total of approximately 1,850 MW from KPCL and the Government.

``This leaves a gap of nearly 1,200-1,700 MW, which has to come from IPPs. This will happen only if escrow or any other securitisation comfort is given by KPTCL or the State Government to Indian financial institutions or banks which are going to finance these IPPs,'' Mr. Moily said.

Sources in the Government said the Parekh committee had cited factors such as ``poor finances of KPTCL, poor finances of the State Government to provide rural subsidy to KPTCL, poor operation, metering, billing and collection of KPTCL and anomaly in tari ff due to low tariff for agricultural sector'' as reasons why KPTCL should not extend escrow cover for IPPs.

Mr. Moily said KPTCL's finances could be improved by better billing, collection and metering practices. It is estimated that KPTCL's outstanding credit amounts to Rs. 1,500 crores. ``KPTCL needs to be more efficient in collecting the outstandings from va rious corporations, municipalities, Government undertakings and rural subsidy from the State Government to improve its financial position,'' Mr. Moily said.

The former Chief Minister added that the Government should also take up with the Electricity Regulatory Commission to revise and rationalise tariffs in accordance with the increase in the cost of power, as had been done elsewhere in the country.