According to confidential estimates made by the government for the power sector, the biggest casualty of sanctions will be the projects for which loan negotiations with the overseas funding agencies were at an advanced stage. This, as per estimates, involves external assistance to the tune of $3,200 million. In addition to this, a host of new generation and transmission schemes totalling $2,900 million, which were to be posed soon for funding by these agencies, will also get affected.

The fate of a host of ongoing schemes for which the loans were to come in tranches also remains undecided in the wake of sanctions. About $1,460 million is yet to be tied up for the ongoing OECF projects in due course. Sources said that it is still not clear whether future tranches for these projects would be cleared in a routinemanner or are subjected to freeze. All these schemes will add up to the list of casualties of sanctions and may have to resort to alternative funding modes.

Official sources said the major centre and state sector schemes, for which negotiations were at advanced stage with the World Bank, ADB and OECF, include $400 million reforms and restructuring assistance for Rajasthan and $400 million time-slice loan to PowerGrid from the World Bank, $300 million assistance each for Madhya Pradesh and Gujarat and another $250 million loan for PowerGrid from the Asian Development Bank (ADB) and $250 million PowerGrid loan for Talcher line and co-financing of R&R programmes of Haryana, Gujarat and Madhya Pradesh from Overseas Economic Co-operation Fund (OECF).

Sources said that negotiations on these programmes have slowed down and may not materialise during the current year. However, donor agencies have continued to express their interest in developing these projects in the power sector for medium-term financing andaccordingly all the executing agencies have been advised to develop these schemes for posing in 1999 and beyond.

The slowdown in negotiations over these schemes, sources said would also affect taking up of new schemes on restructuring programmes of various states besides CEPA-related transmission scheme, eastern-northern transmission link and system improvement schemes for load dispatch centres etc.

The schemes - totalling $2,900 million - identified for funding by these agencies includes the $500-million worth transmission schemes for central and mega projects, $400 million time-slice loan II for NTPC (for its Sipat, Rihand II and North Madras II projects), $500 million for Tuivai and Kameng projects of Neepco, $500 million worth IPP related transmission lines of MP and AP, $100 million for Leiska hydro electric project, $300 million each for reforms and restructuring assitance for Karnataka, Bihar and UP.

Sources disclosed that in the context of the Ninth Plan projections for schemes to becompleted/taken up during 1998-99 to 2001-02, the uncommitted direct foreign lending in the central sector is considered to be of the order of $3,700 million.

"In case the identified projects are to be taken up and no bilateral/multilateral funding is available, we may have to take recourse todomestic borrowings or ECBs. Market conditions for availing access to ECBs and domestic borrowings would play an important role in determining whether the funds of this magnitude can be harnessed from alternative sources," they added. Schemes totalling $1,460 million, for which the future tranches are yet to be negotiated, are Faridabad Gas ($60 million), Simhadari TPS ($250 million), northern India transmission ($12 million), Dhauliganga HEP ($215 million), Ghatghar HEP ($90 million), Barkeshwar TPS ($176 million) and Puruila HEP ($524 million). The loan assistance, however, already pledged by the funding agencies will come in a routine manner.

INSIGHT
Squeeze on industrial growth

Sanctions havejolted the power sector. Delays in completion of ongoing power projects and start-up of new ones seem inevitable. It will take time to work out alternative financial packages following the denial of official credit, notably by US and Japan. What is on the cards is a severe power bottleneck. Even if sanctions are eased over time, the power projects will be delayed by at least a year. This will be detrimental to industrial growth for a couple of years.