Earlier, passing verdict in a case filed by the power companies challenging MPEB's stand on selection of power projects, the court not only strongly criticised the state for its inefficiency but also asked the electricity board to set up a committee to examine the issue.

The companies who filed the case include India Thermal Power, Bhander Power, GVK Power, STI Power and Bhilai Power. They argued that while evaluating the cost competency of the projects, the electricity board considered the forex variation rate at 4.25 per cent annually which was not only lower than the then prevailing rate but was also much below than the projected rate. This has made some of the projects appear cost-effective though in reality they were more expensive. Thisdifference was huge for the project which were bid in dollars or had considerable foreign equity portion. Even as these companies submitted the forex rate projections of the Reserve Bank of India (RBI) and other institutions such as IDBI and Crisil, the board granted the selected companies an escrow account facility.

However, it has put a condition that escrow obligation will depend on the court's verdict.

Meanwhile, the Centre has asked the MPEB to consult the finance ministry on the forex escalation rate before going ahead for some of the private power projects in the state.

"We have asked to the MPEB to wait for the finance ministry's advice on the forex rate issue," said P R Kumaramangalam, the minister of power and parliamentary affairs. The ministry of power had cautioned the board even earlier but recently again around a week ago, it had sent a letter asking the board to consult the ministry, he said. "We have also asked the ministry of finance to provide consultation,' he added. Commenting onthe MPEB's assumption of forex escalation rate, he said this was a "dream escalation rate." Under the present situation not only the project developers will have problems in arranging funds, but MPEB will also face difficulties in allowing implementation of the projects. State may ignore the Centre's advice, it can not disregard the court's judgment, they said. Because of the incorrect assumption of forex rate escalation, MPEB will have to pay a thousands of crore more than it had calculated on the basis of lower escalation rate, they added.