FinMin Sets Up Chandra-Kelkar Panel To Deal With Dabhol Mess

Mumbai, Nov 6: | Updated: Nov 7 2003, 05:30am hrs
The Union finance ministry has set up a high-level committee headed by the former US ambassador Naresh Chandra to expedite the resolution of the impasse over the $3-billion Dabhol power project.

The committee, which held its maiden interaction on Wednesday with finance minister Jaswant Singh, also comprises Vijay Kelkar, economic advisor to the finance minister and Pradeep Deb, joint secretary in the finance ministry.

Offshore Lenders File $171-m Claim On Centre
Our Economic Bureau

Mumbai, Nov 6: The ongoing revival efforts for the Dabhol project on Thursday received a major jolt as the offshore banks incorporated in Austria, France, the Netherlands, Switzerland and the UK have initiated claims totalling over $171 million plus costs and expenses against the Indian government. These claims have been made against the Indian government for its failure to protect the claimants loan to the Dabhol power project following the closure of the plant in 2001.
According to sources, ABN Amro has a claim for $77 million, CSFB of Switzerland for $35.3 million, ANZ EF Ltd for $35.2 million, BNP Paribas for $14.6 million and Erste Bank of Austria for $9.5 million. The claims arise out of the problems affecting the project and reflect the lack of progress by the government over the last two years to agree on a solution that recognises both the political nature of these problems and the rights of the offshore lenders.
The basis of the claim is that the government has failed to comply with its obligations under the bilateral investment treaties between these countries and India, according to the offshore lenders initiating the claims. If the claims are upheld, according to Dua Associates, the legal counsel for offshore lenders, the government would be liable to pay compensation equal to the outstanding loans plus interest, default interest and expenses.
The claimants have invited the Centre to engage in negotiations towards an amicable and comprehensive settlement of all the offshore lenders claims, failing which the dispute would be referred to international arbitration.
These claims can only be brought by lenders incorporated in countries that have treaties with India, but are supported by the offshore members of the beleaguered Dabhol Power Company (DPC) steering committee, including US government-promoted Overseas Private Investment Corporation and five major international banks.

Top sources confirmed the formation of this special committee and told FE that the committee is expected to complete its mandate by March 31, 2004.

The committee would have to address the issue of repayment and political insurance claims involving offshore lenders to the now fallen Dabhol Power Company (DPC) could be settled through the US-government promoted Overseas Private Investment Corporation route.

Secondly, the committee would have to look into the claims made by GE and Bechtel, which hold 10 per cent stakes each in the beleaguered DPC, towards construction and engineering works. GE and Bechtel have claimed over $72 million in this regard and they had terminated the construction contract with DPC since June 17, 2001, following the successive defaults by DPC towards their payments.

Thirdly, the Chandra committee would have to see that the Indian lenders, with an exposure of over Rs 6,200 crore in the troubled DPC and also their guarantee of Rs 3,000 crore in dollar terms, carry out the sale of Dabhol assets on an as-is-where-is basis. It must be mentioned here that Industrial Development Bank of India (IDBI)-led institutions have roped in NM Rothschild to prepare a comprehensive bid document for sale of Dabhol assets and also the restructuring plan.

It must also be noted that Reliance Energy Limited, the Reliance group power utility until recently known as BSES Ltd, reiterated on October 15 that it was quite keen to take over the distressed Dabhol project on an as-is-where-is basis. Besides REL, Tata Power Company-British Gas-Gas Authority of India Limited consortium is also another serious contender for taking over the project in view of the potential for furthering their interest in the LNG business.

This apart, the committee would also look into the option of drawal of Dabhol power by Maharashtra State Electricity Board (MSEB), which may not be the sole buyer. As per the provisions of Electricity Act 2003, the new buyer of Dabhol assets would be eligible for the inter state power supply after payment of wheeling charges to the MSEB.