The first company to use this argument, novel as it undoubtedly is, is the US telecom giant Hughes' joint venture with the Ispat Group for providing telecom services in Maharashtra and Karnataka.

With its financing plans running into serious trouble, especially in the US, after the imposition of sanctions, Hughes Ispat has asked the Department of Telecommunications (DoT) to declare the post-sanctions situation as a `force majeure' condition.

A `force majeure' condition is an event which is beyond the control of the company. So, if such an event occurs, the company cannot be held responsible for any delays in completing a project. In which case, there is no questionof charging them any penalty, of invoking any of their bank guarantees. This also means that the schedule for making payments such as licence fee will also get staggered. The three `force majeure' conditions in the agreement with the DoT are natural calamities, breakdown of law and order, and a court order which specifically suspends work on a project.

Hughes Ispat sent this request to the DoT last fortnight, asking the DoT to give it reprieve in implementing the building of networks in the scheduled time period as well as extension in the payment of licence fee and other dues on the ground of unnatural situation prevailing in the country.

Hughes-Ispat which signed its agreement with DoT last September, was to have completed the initial phase of its network within 18 months. According to experts, Hughes was in a tight spot owing to the $ 400 million (Rs 1,600 crore) loan being negotiated by the company from the US which is now in the dock. The company, it is learnt, was negotiating for this loan for itstwo circles of Maharashtra and Karnataka.

According to DoT officials, the matter is being examined in consultation with the Ministry of Finance. However, these officials felt that though the company could be facing problems in raising resources from the US through loans, to term this as eligible for concessions under `force majeure' may be uncalled for as other options of raising resources could be opted for.

Nearly 55 per cent of the funds required for implementing all basic projects in the country and 35 per cent of the cellular projects were to come in from the US. These have now been adversely affected as a result of the US sanctions. The basic licencees which are most likely to feel the impact of the US sanctions have been identified as Reliance in Gujarat, Tata Teleservices in Andhra Pradesh and RPG in Tamil Nadu.

Tata Teleservices which was negotiating loans worth $ 250 million (Rs 1,000 crore) from US origin for providing basic services in Andhra may also feel the heat on account of the USsanctions.

The cellular service projects which have been identified to be most likely to be affected on account of the sanctions include Birla AT&T in Gujarat and Maharashtra, BPL-US West in Maharashtra, Tamil Nadu and Kerala. While Birla AT&T is expected to find resources to the tune of $ 150 million (Rs 600 crore), BPL's loans worth $ 250 million (Rs 1,000 crore) may be affected.

Further, without guarantees from the export credit agencies, cost of equipment imports for all these projects is also likely to mount as suppliers may demand more money for risk lending.