CEA to vet cost of Videocon project

By K. T. Jagannathan

CHENNAI, DEC. 1. The face-off between Videocon Power Ltd. (VPL) and the Tamil Nadu Electricity Board (TNEB) over escrow cover and financial closure of the former's 1,050 MW coal-based North Chennai project has taken a new turn, raising the hopes of the private power developer.

At a meeting of the Central Government-sponsored Crisis Resolution Group (CRG) in New Delhi recently, the Union Power Minister, Mr. Suresh Prabhu, had reportedly suggested that the Central Electricity Authority (CEA) could look into the claims and counter-claims vis-a-vis cost of the project and come out with its own independent report.

Though no specific timeframe was discussed at the meeting to submit its report, it was felt that ``the issue could be looked into by CEA and a report submitted as regards the reasonableness of cost for various assumptions.''

The move comes in the wake of reported indications made by the Chairman of the TNEB that the cost of the Videocon project ``has been found to be higher vis-a-vis others according to a study made by Credit Rating Information and Services of India Ltd.''

The latest turn of events should bring some comfort to the Videocon group that has opted to prune its staff strength here in the wake of the unfavourable developments.

The TNEB board, it is understood, had taken a decision in August itself to cancel the escrow cover given to the Videocon project and re-allocate it to four other private power developers.

The TNEB, it is gathered, had relied on the CRISIL report while deciding so. Even as it was in the process of taking a legal view on the consequence of its action, Videocon had moved the Madras High Court, seeking to restrain the State Electricity Board from taking any adverse action against it on the escrow issue.

Videocon Power is also contemplating to tackle the stand-off with the State power utility by invoking the arbitration clause in the Power Purchase Agreement that provides for activising the dispute resolution mechanism in the form of an arbitrator to sort out contentious issues.

Videocon Power has maintained that there ``is no provision in the PPA or escrow for `expiry' of the document concerned. There is, however, a provision for `terminition' in these documents.''

It has claimed that neither party has taken any action so far to terminate the two documents. According to Videocon, the State utility had been in correspondence with it on these issues until September this year.

According to Mr. A. K. Ahluwalia, Chief Executive, Videocon Power, the company had agreed to bring the capital cost down to the level prevailing at the time of techno-economic approval. In the bargain, it had agreed to absorb any escalation in cost.

Though Videocon is pulling all stops, the TNEB top brass appears to be unperturbed. Close on the heals of Videocon dragging TNEB to court, the head of yet another power company waiting indefinitely for an escrow cover called it quits in desperation to pick up a job in a new economy company.

With too many vying for too little escrow cover, Videocon may have provided TNEB the needed width to wriggle out of a piquant situation.

With elections round the corner, the issue has the potential to take a political overtone.

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