Sources said the Tamil Nadu government and the Tamil Nadu Electricity Board had urged the State Bank to release the lien on board's receivables. The move would have strengthened the board's escrow offering ability, sources said.

But it seems that the State Bank has not yet relented fully, even though negotiations are on to persuade the bank to agree to release the lien on the revenues earned by the board.

Apparently, the State Bank and some other banks have extended a cash-credit arrangement, amounting to Rs 120 crore to the board which is availed of in the form of continuing facilities like overdrafts and short-term loans. The cash-credit arrangement comes with the stipulated condition that State Bank has a general lien on the full revenue stream of around Rs 500crore, a month now before the board could earmark it for offering escrow cover to independent power producers (IPPs).

The board and the Tamil Nadu government had a meeting with the State Bank recently in New Delhi seeking that the lien on receivables be done away with fully, but the State Bank is said to be sticking to its position. The bank is willing to release the lien only partially. Sources said the State Bank cash-credit arrangement is backed by the Tamil Nadu government guarantee, but the bank is sticking to its stand. The issue is far from being resolved.

The on-going tussle has added a new dimension to the board's escrow problems. The board finds itself bound by IDBI-imposed limit on its escrow ability at 2500mw and cannot extend escrow cover for several other independent power projects. Independent power producers want escrow cover for getting lenders' support for the power projects and head for financial closure. Without escrow cover they have expressed doubts about getting financialinstitutions to back their projects and get required funds.

Although the board's revenue generation has gone up by some Rs 50 crore a month, following the recent tariff hike by 11.45 per cent, sources said escrow cover to independent power producers could be given only in phases.

Financial institutions have agreed to clear eight power projects in the state, including Videocon, ST-CMs, Balaji Power, SIV Industries and four short gestation liquid fuel-based power projects.

These apart, the board is also committed to provide escrow cover to Spic Electric Power, PPN Power, Tri-Sakthi and Jayamkondam. Sources said the board would offer escrow cover for the Jayamkondam project for 500 mw. The cover for balance 500 mw will be considered later. All escrow support extended by the board comes with the condition that the projects must head for financial closure within six months of getting such cover. Meanwhile, the board is also concerned with the issue of identifying bank branches and earmarking them to getreceivables for escrow purposes. Sources said Tamil Nadu has a total of 700 bank branches, and the process of identification of bank branches will take a while.

It is in this context, sources said the escrow agreement with the 330mw Pillaiperumalnallur project has to be reopened to agree for a mutually acceptable bank branch for receivables.

Although the board has hiked tariffs and revenues have increased by Rs 50 crore a month to fetch currently a total of Rs 500 crore a month, sources said the board could only provide a portion of this for escrow purposes and the balance would have to be kept for meeting its various overheads, coal imports, wages and so on.

However the board reckons that the actual escrow amount payable to independent power producers owing to a default in payments will come into effect only after four or five years when the projects get commissioned.