Power ministry officials disclosed that out of the fuel linkages provided earlier for setting up liquid fuel based power projects with capacities totalling 12,000 MW, a mere 3,000 MW were expected to come as many promoters were backing out while experiencing problems on achieving financial closure for their projects.

The new directive of allowing the state governments to plan for more liquid fuel capacities and change the existing promoters facing difficulties, will now speed up the setting of liquid fuel-based projects by getting serious players in the field.

The states, under the new policy, can also reallocate the existing fuel linkages by giving them to the new promoters, if the existing promoters are not capable of executing theproject.

The new liquid fuel policy has also removed the 12,000 MW ceiling for liquid fuel power projects and this ceiling will now apply only for the non- naphtha-based power projects. This has, however, made the promoters of naphtha-based power projects unhappy as they feel that the cost of power from naphtha-based projects would be far expensive compared to other liquid fuels.

"Moreover, the new liquid fuel policy does not give the promoters of the naphtha-based power projects a choice to switch over to other fuels, which are comparatively cheaper", says Harry Daul of the Independent Power Producers Association of India (IPPAI).

According to Harry Daul, it is also not clear in the new liquid fuel policy whether the projects to be set up under other liquid fuels, for which the ceiling of 12,000 MW is not there, it is not clear whether they will be on the competitive bidding route or the MoU route.

Under the new policy, the government has also put condensate and orimulsion, to be used as fuels, onthe open general licence (OGL) list, but subject to the actual user condition which.However, the government's move of extending the deadline for financial closure for liquid fuel projects to October 31, 1998 from March 31, 1998 has come as a major relief for many who were still in the process of settling loans and finances from financial institutions and banks.