No Ratna PSC until Essar shows loan with ICICI

Vol 6, PW 16 (09 Oct 02) Exploration & Production

UNLESS ESSAR PROVES it hasn't mortgaged future revenue from Ratna to finance its Vadinar refinery, there won't be a PSC for Ratna.

"We have written to both ICICI and Essar," reveals a ministry source. "ICICI is keeping silent but Essar writes merely saying they are willing to abide by the terms and obligations of the PSC." Shastri Bhawan wants to see a copy of the loan agreement between Essar and ICICI before signing a PSC for Ratna.

According to a source, Article 29.8 of the PSC states that partners cannot "mortgage, pledge or charge their interest" in the block without informing the other parties or the government. More, such arrangements can only fulfil obligations under the PSC.

"There is a contradiction between this provision and our information that Essar has already charged its participating interest as the first ranking security against loans for their refinery." It appears Essar signed its loan agreement with ICICI before initialling the PSC. "Why did they initial the PSC when they knew it contained a provision barring them from mortgaging their interest in the field to raise money for an unrelated project" adds a source.

"Why are we not being shown a copy of the loan agreement" Only if ICICI releases Essar from its commitment, is there hope for the PSC. But if this happens Essar's refinery project financing will unravel.

"We can't help them in a situation where their ICICI loan and the PSC go against each other."