For example, many power projects conceived and approved are yet to take off because typically the PPAs are for a ten-year period, while project lending is sought for 20 years.

Infrastructure Leasing & Financial Services Ltd (IL&FS) assistant vice-president Narayan Anand had recently told The Financial Express that FIs are wary of lending long-term as they fear risk of recovery of funds lent to a project of 10 years.

So FIs are seeking that PPAs cover the entire duration of the project so that some comfort level will be available to them to lend long-term in terms of guaranteed SEBs payments to promoters over longer periods.

Quite apart from the uncertainty facing SEBs in terms of receivables over a long-term for which FIs are demanding escrow cover, Anand said FIs are concerned because tariffs are being fixed without the State Electricity Regulatory Commissions being set up whose mandate it will be to fix tariffs.

"One of the major concerns of FIs for lending to power projects is the likely tariff revision once the SERCs are in place. How can FIs start lending to power projects with tariff uncertainties which may completely skew receivables of SEBs?" he asks. Ideally, FIs do not want to take risks beyond eight to 10 years but most power sector projects seek long-term lending for 20 years or more.