CALCUTTA, Dec 20: The RPG group promoted Balagarh power project is expected to clear the last hurdle soon, with a clearance from the Foreign Investment Promotion Board (FIPB) no longer required, high-level sources said.

The Rs 2060-crore project is being set up by the RPG flagship CESC Ltd, via a new company, Balagarh Power Company. CESC has an equity stake of 35 per cent in Balalgarh Power, with foreign partners holding a total of 60.6 per cent between them.

The CESC sources said the FIPB sanction is no longer required for power projects in which the foreign stake is less than 74 per cent. The West Bengal power department, which had held up the project for some time, cleared it last month.

The state has also indicated that RPG can go ahead without the FIPB's clearance, the sources said. The project is now proceeding towards financial closure and is expected to be commissioned by 2001, they added.

The 2x250mw coal-fired thermal station, originally expected to cost Rs 2235 crore, will be set up on an island in the Hooghly 70km upstream of Calcutta.

It will take care of the megacity's growing power needs in the first five years of the next century. The facility, being developed on a build, own, operate & maintain (BOOM) basis, is expected to be completed within 30 months of the financial closure. The power generated will be sold to the CESC grid over a 220kv transmission line to be built by CESC.

The RPG sources said that as soon as the formalities with potential lenders and equity investors are over, the company will apply to the Reserve Bank of India (RBI).

The FIPB clearance for Balagarh was given in 1995. The clearance was valid for two years. When CESC could not get the other required clearances within two years, it applied afresh to the FIPB.

However, on February 2 this year, the union power ministry notified that the FIPB's clearance will no longer be required for power projects in which the foreign stake is less than 74 per cent of the total equity.

In Balagarh, out of the total foreign equity of 60.6 per cent, 10.4 per cent will come from Siemens AG of Germany. Other foreign stakeholders will be Australia's BHP Power, AIG Infrastructure of the US, and the multilateral lending bodies International Finance Corporation (IFC) and Asian Development Bank (ADB).

CESC Ltd will hold 35 per cent, and the Industrial Credit & Investment Corporation of India (ICICI) 4.4 per cent.

The state government forwarded the union power ministry's letter to Balagarh Power in April. The debt-equity ratio of the project will be 2:1. Apart from equity funding by the IFC, ADB and ICICI, the project will get loans from ANZ Grindlays and Dresdner Bank. Hermes, the German export credit guarantee agency, will back the imports required by Siemens AG. An all-inclusive contract has already been signed with the German company, which is the engineering, procurement and construction (EPC) contractor.

ICICI and ADB have sanctioned loans for the project. Negotiations with IFC and Hermes are at an advanced stage, the sources said.

Coal will be supplied by the Eastern Coalfields Ltd, a subsidiary of Coal India Ltd. The company is now in talks with Eastern Coalfields Ltd over the pricing issue.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.