Karnataka rejects escrow cover for IPPs

Vol 4, PW 5 (12 Apr 00) Midstream & Downstream

Foreign companies with power projects in Karnataka could soon be in for a rude shock.

On 6th April the state's Chief Minister, SM Krishna (the man who famously snubbed Bill Clinton because he ignored Bangalore on his South Asia tour) told the local state assembly that escrow cover for power projects is "unscientific and unimplementable". In an exchange with opposition legislators, Krishna confirmed that the state government has accepted the recommendations of the 'Deepak Parekh Committee Report' set up to examine the issue of escrow cover.

Frustratingly, he did not reveal exactly what those recommendations are, or when and how they will be implemented. Inquiries by Petrowatch suggest the 'Deepak Parekh Committee Report' is not yet in the public domain, despite the fact that its deadline for submission was 11th February.

Hints of what it contains were given in the parliamentary exchange. Krishna said IPPs wanting escrow cover should demand it from Delhi as part of the 'Sovereign Guarantee' - not from the state government.

He also cast doubt on Unocals participation in the 300-MW Bidadi power plant promoted with the Karnataka Power Corporation (KPC). "Since KPC is involved, even if the private company withdraws, there is no problem." Until now there has been no indication that Unocal is ready to "withdraw" from Bidadi, but could that change A report from Delhi suggests Unocal has put on holdequipment contracts for Bidadi until clarity emerges on the escrow issue.

Karnataka authorities must publish the recommendations of Deepak Parekh - if only to clear the air.