IDBI wants to sell Dabhol Bonds to Indian public

Vol 6, PW 15 (25 Sep 02) People & Policy

AS DABHOL GATHERS rust, Indian lenders led by IDBI have dreamt up another dubious rescue plan.

We understand IDBI made a presentation to the finance ministry early this month and, based on this presentation, a formal proposal is now being formulated. Finance secretary Subbaram Narayan outlined key elements of the rescue plan during a 16th September meeting in Delhi with a senior official of the US government agency Overseas Private Investment Corporation.

In summary, IDBI wants to sell Tax-Free Dabhol Bonds worth about Rs5, 000cr ($1bn) to the Indian public. These bonds will be for five years with an annual interest rate of about 9%.

Money raised will pay off Dabhol's foreign loans of about $850m, thus eliminating foreign lenders from the picture. Indian lenders will then foreclose the assets and dissolve the Dabhol Power Company.

Surplus cash will be used to complete construction of 'Phase-II' of the 2,184-MW power station, the 5m t/y LNG import and regassification facility. When complete, the power plant will resume generating electricity, and IDBI will scout for a buyer.

IDBI expects a "good price" for a functioning power plant. "We should not forget that DPC assets are worth Rs10, 000cr ($2bn), even in the state they are in, and are eligible for 100% depreciation." Crucial to IDBI's plans is National Thermal Power Corporations willingness to operate Dabhol for two or three years before it is sold.

New power minister Anant Geete can be trusted to force NTPC to drop its earlier reluctance to get involved: Dabhol is located in his Ratnagiri parliamentary constituency; its revival would do wonders for his local popularity!