Significantly, despite the prevailing market conditions, this loan has been mobilised by Power Grid on almost the same terms and conditions as that with any multilateral or bilateral funding agency.

Top banking sources told The Financial Express that this loan has a maturity period of 25 years, with a moratorium of five years and repayment schedule of 19 years.

Sources said the interest cost for this loan, in dollar terms, works out to be less than 7 per cent and is comparable with the interest rates at which other public sector power utilities have been raising foreign funds through various loan syndication exercises abroad.

Banking sources added that Power Grid has secured government's approval for raising this loan and that the loanagreement was signed by the chairman and managing director, Power Grid, R P Singh on Friday, last week.

This loan will be used by Power Grid for part financing the huge fund requirements for building transmission lines for the Talcher-II thermal power and Tehri hydro electric projects.

Power Grid requires funds to the tune of Rs 3,800 crore for laying a 2000 kilometer long transmission line for Talcher-II.

Whereas, earlier before the economic sanctions were imposed, funds for about Rs 1,800 crore were to come from OECF and the balance of Rs 2,000 crore from the World Bank.

However, official sources said that that even if the economic sanctions are lifted, the Rs 1,800 crore OECF loan is unlikely to materialise.

"The terms set by the OECF are tailored to suit the interest of the Japanese companies for supplying equipment for the Talcher II project. However, Power Grid's reluctance to change the qualification requirements may result in cancellation of this loan", sources added.

Alternativearrangements are therefore being made for procuring huge line of credit from a host of leading domestic and international funding companies.

In addition to this, sources said that Power Grid is also considering a proposal to raise another $ 100 million from the overseas market through the Asian Development Bank's (ADB'S) credit enhancement mechanism.

However, this proposal is still under evaluation and no final decision has been taken by the transmission company in this regard.

In order to meet its fund requirements for the current financial year, Power Grid has recently raised a loan of Rs 250 crore with the State Bank of India (SBI). Another $ 250 million is being negotiated with SBI, sources said.

Meanwhile, Power Grid has also worked out an action plan for the Ninth Plan projects, if the loans under negotiations with the World Bank, ADB and the OECF does not materialises.

Under these conditions, Power Grid plans to raise $ 200 million through the ECBs route and Rs 2,000 crore by way of domesticborrowings.