State govt, MSEB reject DPC lenders demand for escrow

Mumbai, May 7: The Maharashtra government and the Maharashtra State Electricity Board (MSEB) have firmly refused to adhere to “any conditions,” including providing an escrow cover and raising the limit under Letter of Credit (LCs) to Enron’s Dabhol Power Company (DPC) as per the latest demand by its global and domestic lenders.

In a strongly worded seven page response to Union finance secretary Ajit Kumar dispatched on Sunday, the state has categorically ruled out “towing the line” to an array of ’dictats’ by the lenders and has presented the validity of its point distinctly, a senior state government official said.

In a letter (dated May one) to Mr Kumar, the consortium of banks—ABN Amro, Credit Suisse First Boston (CSFB), Citibank NA, ANZ Export Finance Ltd and Bank of America, and IDBI have asked for payment of the disputed Rs 213 crore December and January bills, an escrow cover, an increase in the letter of credit amount and +henceforth+ honour the counter guarantees and its obligations in the Power Purchase Agreement (PPA).
“We have made it clear to the Centre that we cannot pay the December and January bills as the matter is now under arbitration,” the government official said.

“So long as DPC’s political force majeure remains activated, we will not provide the escrow or hike the LC limit,” he added. He said both the state and MSEB were surprised by the financial institutions’ belief that the board’s Rs 401 crore penalty on DPC was “frivolous” and should be withdrawn. “This is a biased view endorsed by the DPC which is not even ready to recognise the penalty,” he said. The official said that Maharashtra has also raised its concern over the lenders’ demand that “MSEB should not be allowed to issue a pre-termination notice to DPC.”

Terming this as an “unreasonable” demand, he said, “MSEB can very well issue the notice to DPC, its part of the PPA, which the multinational has alleged that we violate so often,” he pointed out.

The official said the very fact that both the sides should honour the obligations, should be brought to the lenders’ notice, as like MSEB, DPC was also a defaulter.

“What is more distressing is that our very own Indian lenders led by IDBI are singing the foreign tune,” he said. (PTI)