FIs set 60-day notice period for Essar Power to clear dues

Suresh Nair and Sitanshu Swain

Mumbai, May 12: FINANCIAL institutions (FIs) led by Industrial Development Bank (IDBI) has given 60 days time to Essar Power to clear the dues of over Rs 150 crore. FIs have threatened to take stringent legal action if Essar Power defaults.

Both IDBI and ICICI have already served a loan recall notice on Essar power (EPL) because of non-payment of loan instalments. ICICI, however, later withdrew the notice.

‘‘We had given them enough time to settle their dues but in vain,’’ said a top IDBI official, adding that the company faced the same problem with ICICI. ‘‘The company either has to clear its entire past dues or law will take its own course for the recovery of entire loan exposure,’’ the official said.

Apart from Rs 8-crore in interest, Essar Power owes over Rs 150 crore to both IDBI, ICICI and other banks as loan instalments.

The total debt exposure of the FIs and banks to Essar Power is pegged at over Rs 1,200 crore.

However, Essar Power has said that it is negotiating with the financial institutions for the withdrawl of the notice.

‘‘We will clear all the dues of the institutions due for 2000-2001 and would ask for the withdrawal of the loan recall notice,’’ Essar Power officials said.

The company has already paid Rs 32 crore out of the Rs 40 crore which was due to IDBI as interest dues.
The company officials said that the payment of Rs 8 crore will be made but a final settlement over the issue of lenders charging an excess of Rs 227 crore by denying the company tax benefits under section 10(23G) of the Income Tax Act is necessary to clear all the past dues.

Expecting a prolonged negotiation, sources said in case Essar Power makes some payment now, there are little chances of IDBI withdrawing the loan letter. They feel the lending institutions may, at best, put it on hold.
IDBI had decided to recall its loans to Essar Power as the company had defaulted on repayments in spite of earning net profits in the past four years.

The lenders were forced to take such drastic action as it found that the company was not very serious about honouring its commitments.