According to VPL's chief executive Mr A K Ahluwalia, the dispute resolving mechanism through arbitration proceedings has been activated and hearings before the arbitrator are expected to commence by the end of this month or early December.

Arbitration is to be done by a three-member panel; one each designated by VPL and TNEB and the third member of the panel is nominated by the two arbitrators. According to a condition in the power purchase agreement (PPA) signed by TNEB with VPL, disputes have to be resolved through an arbitrationaward.

Speaking to The Financial Express, VPL's chief executive Mr Ahluwalia said the arbitrator's award is binding on both parties. Videocon is confident of the arbitration award going in its favour. He said, "We believe our case is very strong."

Meanwhile, Mr Ahluwalia also responded to Tamil Nadu government's health and electricity minister Mr Arcot Veerasamy's observations in the state assembly earlier this week on the reasons for scraping Videocon's power project in North Chennai.

The minister's statement in the assembly, Mr Ahluwalia contended, does not present the facts of the case correctly. The company has rebutted the various statements made by the minister answering each point separately thus: On PPA and escrow having expired, VPL says there is no provision in the PPA or escrow for expiry, only for termination which have not been acted upon by either TNEB or VPL. Also, TNEB had kept in correspondence with VPL till September 26, 2000 seeking clarifications and had given time to the company for resolving pending matters till August 2, 2000. The company had responded, by completely complying with TNEB requirements on the pending issues by July 21, 2000. Since then, matters have been pending exclusively with TNEB. Therefore, TNEB cannot claim these have expired.

On Videocon having hiked the capital cost by Rs 300 crore, VPL argues that the tariff with the said increase in capital cost was not inferior to the tariff as already approved. However, on TNEB's insistence, Videocon agreed to reduce the capital cost as required by TNEB to the level prevailing at the time of TEC approval as on April 3, 1996. Also, Videocon has agreed to absorb any increase in cost and met TNEB requirements in full on July 21, 2000. However, TNEB has still to send its recommendations to CEA.

Regarding the Videocon tariff being high and costing Rs 900 crore additional per year to TNEB, VPL points out that CEA has examined the Videocon project tariff and satisfied itself that the project tariff is `reasonable'.

As for Videocon having delayed implementation of the project, VPL states that the MoU was signed in February 1995 and was ready for financially closing in the middle of 2000. That is, in around five year's time. Actual closure was held up because of TNEB obstructing the process saying it has already waited too long, and over many extensions. On the other hand, other projects in Tamil Nadu, though much smaller, were given a timeframe of six to seven years by TNEB to close (ST-CMS: 7 years and PPN: 6 years).