The move apparently follows discussions which representatives of Dakshin Bharat Energy, a consortium comprising CMS Energy, Aditya Birla Group, Siemens, Woodside & Unocal, have been having with Tamil Nadu Industrial Development Corporation (Tidco).

A CMS Energy official said a proposal to earmark a certain portion of sales tax revenues as escrow cover for the project is considered not viable as there are many legal hurdles in having such an arrangement.

Speaking to press persons on Friday on the occasion of opening of its own office in Chennai, the official said detailed discussions were still going on with the state government of Tamil Nadu and Tidco for putting the escrow mechanism in place by exploring other options.

Without mentioning the cess on electricity, the official said two proposals for an escrow mechanism at the state level are under evaluation and are found to be attractive. The usual escrow ability of TNEB as an option is considered highly improbable as its existing escrow capacity itself is under tremendous stress.

A third alternative recently looked at was in the mega power policy area but no final decision has been taken.

The idea of an electricity cess, will allow authorities to skirt legal requirements under the Sales Tax Act for earmarking a portion of sales tax revenue as escrow cover.