While the official notification has put January, 31, 1999, as the last date for achieving financial closure, union power minister PR Kumaramangalam has gone on record saying that independent power producers have been given extension till March, 31, 1999.

Briefing reporters soon after the Kondapali power project in Andhra Pradesh announced financial closure a month ago, Kumaramangalam said his ministry has decided to fix March, 31 as the deadline.

The minister also said that no further extension would be accorded to the independent power producers after March, 31, and that if the deadline was not met, the linkages of these power producers would be cancelled and the projects would be scrapped.

"However, despite the minister's statement, there has been no official intimation from the power ministry as yet and we are still given to understand thatJanuary, 31, is the last date", said a leading independent power producer.

While it is yet to be seen as to how many power projects actually achieve financial closure, it may be noted that there are still many projects who are jostling for techno-economic clearance from the Central Electricity Authority (CEA).

Moreover, there are many other projects that are struggling for finances from financial institutions. The institutions seem to be hesitant in extending funds as they feel that given the current status of the elctricity boards in the country, the viability of these projects is at stake. This is one of the major constriants towards achieving financial closure of the power projects.

IPPs feel that delays in the security package finalisation is the biggest roadblock to financial closure of power projects. Moreover, most of state electricity boards do not meet the criteria of credit worthiness owing to their uneconomic tariff structure.

Despite state electricity boards opening LCs and escrow accountsto cover payment risks, given the poor financial position of electricity boards along with limited escrowability, financial closure remains elusive.

Projects have also been delayed on account of the complex structure of clearances and statutory approvals. Frequent government announcements regarding modifications in the power policy has added to the delays. The recent decision of the government to allow only lower of actual and normative rate in tariff calculatios may cast a shadow over the credibilty of the power purchase agreement (PPA).

Earlier, the major problem of tying-up of rupee funding was the goverment norms of 40 per cent limit on fund-based assistance from financial institutions and banks.

Although this restriction has been removed, prudential norms of limited exposure of 25 per cent of financial institutions net worth to a particular group and 15 per cent restriction on asset in a particular sector may become future impediment.