Enron and Hughes Ispat were negotiating with the US Exim Bank while National Power and BPL Power were close to finalising cheaper lines of credit from Japanese Exim Bank. "Uncertainty over the nature of the sanctions and the alternative steps to be taken by these companies will cause hiccups," said a background note on `Implications of sanctions on Indian economy' prepared by the Indian Merchant Chamber (IMC).

Enron, Hughes Ispat, National Power and BPL Power may have to "restructure their costs" and look elsewhere. However, this may not affect the project, as there are alternative sources of funding. British and European companies were said to be eager to step in to provide even cheaper finance.

``Also US Exim's moves to stall fund flows to ongoing projects may belegally questionable. Many lines of credit have been sanctioned but not fully disbursed. So there is a case for sueing these agencies for violation of contract if the sanctions forbid withdrawal of the remaining amounts or stop guarantees to these projects midway,'' the study said.

Hinduja National Power Company which is setting up a 1040 MW power project in Andhra Pradesh has a significant debt participation by Japan's Exim Bank. Hughes Ispat has a tie-up with the US Exim Bank for $ 275 million.

Corporates are already talking about difficulties in raising long-term funds from the US market as the political risk premium on loans to India have shot up by over 8 per cent. A dollar loan from US commercial banks may now cost 16-18 per cent. Moreover, rates of commercial paper (short-term loans) of corporates have gone up in the Indian market.

However, it said, sanctions imposed by the US and Japan may have a marginal impact on India and this will result in relooking at economic strategies and strengtheningforces of self-reliance. "The country needs to pull up its socks to face the renewed challenges," it said. IMC president Y P Trivedi said that the US would limit sanctions to inter-government expenditure between India and the US - a meagre $150 million - and that the World Bank would not keep the loans frozen for too long.

According to budget estimates, India received Rs 9,899 crore in multi and bilateral loans in 1997-98, less than one per cent of GDP at 1997-98 prices.

In the previous year too, it received a similar amount. The WB's International Development Association, with over Rs 3,600 crore loaned in areas like irrigation, agriculture, transport, fertilisers, railways, telecom and healthcare, has more than 50 per cent exposure in multilateral assistance to India.

The International Bank for Reconstruction and Development was the second biggest multilateral lender to India at Rs 1,900 crore.