Sources said the ministry would not grant extension beyond the date unless a representation offering adequate justification, along with a recommendation by the state government, is submitted before December, 15, 1998.

"A letter has also been written to the ministry of petroleum and natural gas to accept the proposal, and communicate the decision to the public sector undertakings under its ambit. Following the acceptance by the petroleum ministry, states will be informed," officials said.

They said independent power producers have not used the seven-month extension to achieve financial closure to date and that the ministry is inundated with representations for the extension of the October, 31 deadline.

A senior official said the matter wasreviewed in the ministry, and it was found that majority of the projects could not achieve financial closure for reasons beyond their control.

"Most of the independent power producers are experiencing difficulties in tying up finance owing to the non-availability of escrow space in states, which is why the power ministry has decided to allow a further extension," he said. The power ministry is extending the deadline for the second time during the year. Earlier, the deadline was March, 31, 1998, which was then extended to October, 31, 1999.

When contacted Independent Power Producers Association of India director general Harry Daul said extensions would not help projects to achieve financial closure. The power ministry must ensure a proper coordination between its wings to get the projects on track.

The Central Electricity Authority (CEA) has been sitting on many projects and without its techno-economic clearance, projects cannot achieve financial closure, he said.

Then there are projects which havesecured techno-economic clearances, but are jostling for finances with financial institutions owing to reasons like the non-availability of sufficient escrow space in some states.

"These are issues on which independent power producers do not have any control and, therefore, until the basic issues are addressed, only a handful of the liquid-fuel projects will see the light of the day. Extensions, thus, will become a mere joke," he said.

Concurring with Daul's view, KPMG power consultant Ashok Das Gupta said deadline extension was no solution, and unless adequate financial-security packages are made available to promoters, the projects will not be able to achieve financial closure.

The poor health of the state electricty board does not give them the financial muscle to support more than a few projects in terms of regular reimbursement of bills, opening of letters of credit and escrow accounts favouring promoters in banks and providing the comfort of a state-government guarantee.