NEW DELHI, Nov 4: The 15 per cent sectoral cap on lending by financial institutions to the private sector for power projects will be removed soon. The finance ministry will shortly have a meeting with the heads of various financial institutions in this regard.

Prime minister IK Gujral has asked the power ministry to clear all mega power projects, including fast-track projects, by the end of the current financial year.

The prime minister has also proposed setting up of a power trading corporation. This will be a central public undertaking which will buy power from big plants.The prime minister has also asked the power ministry to examine the feasibility of setting up this fully commercial organisation which will trade in power at an inter-state level.

Power minister YK Alagh said that the ministry would study the modalities of setting up such a corporation and would find out if laws need to be amended for the purpose.

After reviewing the private sector projects in a meeting with Alagh along with other senior officials from Planning Commission and the power ministry, the prime minister directed that all counter-guarantee projects should be cleared by December.

Alagh said that in a meeting scheduled for next week, the cabinet secretary will review all those private sector power projects whose clearance is held up either due to problems in finalisation of the fuel supply agreement or because of non-availability of funds from the financial institutions.Some of the mega projects hanging fire include the US power utility Consolidated Power, Asia's gigantic 10,000mw plant to be located in Orissa in different phases.

Alagh said that though 17,000mw generation capacities in the private sector were cleared by the Central Electricity Authority (CEA), very few projects have actually reached their financial closures.

In the meeting with the cabinet secretary, detailed discussions will also take place on the progress of four fast-track projects which include Vishakhapatnam power project, STS-Lignite, Cogentrix and the Bhadrawati power project.

Alagh said that the finance minister would ask financial institutions and banks to look at the viability of a power plant at the project level and not the past receivables of the state electricity board or the state government while lending.The prime minister will shortly write to state chief ministers to ensure faster implementation of power sector reforms. Gujral said that the 7 per cent growth rate in electricity generation achieved during the first six months of the current financial year be maintained and efforts be made to increase it further.

Alagh also informed that the prime minister has asked the power ministry to prepare a review paper on conversion of naphtha-based power projects to gas-based projects.

Alagh said that in the meeting, it was also agreed, in principle, that the public sector power projects not seeking budgetary support can be approved without prior clearance from the concerned investment board.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.