Top sources in KSEB said that the board had floated a Rs 200-crore non-SLR bonds with a green-shoe option of another Rs 150 crore. The bond, which opened for subscription a couple of days ago, carries a coupon rate of 15.5 per cent.

KSEB has appointed Canara Bank and the Delhi-based, RR Consultancy, as the arrangers to the issue. The issue will close on February 20.

The KSEB has been tapping the market to raise finances for funding a slew of projects it is planning to execute during the next couple of years. Top on the agenda is the 163 Mw Athirappilly hydel power project, which is estimated to cost Rs 500 crore.

The project got the techno-economic and environment clearance for thehydro-electric project recently. The project will be implemented on a turn-key basis.

The board is also raising resources for the 128-Mw Kozhikode diesel power plant. The cost of the plant is estimated to range between Rs 300 crore and Rs 400 crore. The board has already lined up a part of the debt requirement for the project from Canara Bank.

According to the board's estimates, the KSEB has to incur a whopping Rs 4,380 crore expenditure to complete the projects during the period 1997-2002. Of this, Rs 350.06 crore will be raised through internal accruals and another Rs 735.51 crore as assistance form the State government. The remaining Rs 3,294 crore has to be raised through market borrowings.

The State Planning Board's decision to treat commercial banks subscription to KSEB's debt papers on par with bank credit has helped to get a better response to the KSEB papers from the market. The subtle move by the State government is aimed at enhancing the credit-deposit ratio of the commercial banks in theState and to provide one more cover to the KSEB's borrowing programme in one go.

Meanwhile, the KSEB has been finding the going tough with its finances dipping to abysmally low levels. Sources said the KSEB had been forced to divert the capital raised from the market to meet the current expenditure.

A crisis-like situation has been lingering in the KSEB as its expenditure far exceeds its revenue.

Power minister, S Sarma, is on record saying the board is suffering a loss to the tune of Rs 2 crore per day. For every unit of power sold, the KSEB is suffering a loss of Rs 0.35.

This assumes significance in the wake of the Centre's directive asking the KSEB to make 16 per cent profit by the end of the current fiscal. It is learnt that the board strapped for cash has to pay for the power purchased from various producers by dipping into its borrowed money.