Top government sources said a final view over the issuance of gyarantees to mega power projects will emerge this week as the power ministry plans to put up this proposal for cabinet clearance before December end.

Sources said that before the PMO meeting, the union power minister, Suresh Prabhu is also meeting the finance minister, Yashwant Sinha to discuss this issue. Considering the fact that the magnitude of guarantee assistance required for mega power projects is very high, the finance ministry along with the FIs and banks had been expressing their reservations on providing guarantees to these projects.

It may be recalled that the financial institutions led by the Industrial Development Bank of India (IDBI), in a recent meeting, had suggested that the government should involve National Thermal Power Corporation (NTPC) instead of PTC in trading of power from mega power projects.

Moreover, sources disclosed that IDFC has also suggested that instead of power ministry's proposal to give government's guarantee via the FIs and banks, the Power Finance Corporation (PFC) should be asked to guarantee payments by the state electricity boards (SEBs).

This, as per IDFC, is more suited because PFC is the only dedicated domestic financial institution for the power sector and has been actively involved in initiating reform linked funding in several states. IDFC feels that PFC is best suited for guaranteeing payments as it has already been extending commercial loans to most of the SEBs, with an excellent recovery of 99.4 per cent. Besides PFC has strong financials and a large balance sheet.

IDFC wants to limit its participation to just project finance. In addition to this, IDFC has communicated that it will also subscribe to the debt to be issued by PFC for meeting the liquidity requirements besides participating with PFC in the area of SEB reforms.

Meanwhile, the power ministry has turned down IDFC's proposal to involve NTPC in trading of power from mega power projects.