Power : No Escape from Reform

The financial institutions have agreed to fund power projects without insisting on escrow cover from the state electricity boards. They will link their funding instead to commitment from the respective state governments to time-bound reform of the power sector. The state governments will give written undertakings with regard to the reform schedule and the financial institutions will provide funds in a phased manner in step with the progressive fulfilment of the governments’ commitments.

The union power ministry, it is well known, had been pushing the financial institutions – the IDBI, the ICICI and the IDFC mainly – in this direction. At a conference on the future of the Indian power sector in Delhi in early April, power minister P R Kumaramangalam had sounded quite desperate. Acknowledging that investment in power had more or less dried up, he had urged the financial institutions to explore alternative models of funding so that financial closure of pending power projects could be expedited.