$1-b fund to boost Indian power firms in South Asia

The Government is firming up plans for an over $1 billion sovereign-backed fund to boost trade and investment by domestic power utilities in South Asia.The Commerce Ministry has asked the Export-Import Bank of India (Exim) and the Export Credit Guarantee Corporation of India (ECGC) to work out the contours of the fund, a senior Government official told Business Line.

The fund is aimed at developing a South Asian regional energy grid, with focus on renewable sectors such as hydro, solar and wind.This could step up investments by domestic firms led by renewable players and transmission utilities including Suzlon Energy, Moser Baer, Satluj Jal Vidyut Nigam (SJVN), NHPC Ltd and Power Grid in countries such as Bhutan, Nepal, Sri Lanka, Maldives and Bangladesh.

The competitively-priced fund will be scaled up later. After the details are finalised, the Government will organise workshops to gauge industry's response to the fund. The proposal for the fund followed an internal assessment of the huge power deficit situation prevailing across the entire region.

The fund, which is a risk mitigation measure, would use the resources of the Rs 2,000-crore National Exporters Insurance Account (NEIA), managed by the Commerce Ministry and the ECGC.ECGC will cover small-sized medium- and long-term projects. The fund would be used for “strategically important” power projects, where the repayment schedule is over five years and the reinsurance support is not available.

For this the project will have to be cleared by a working group comprising the RBI, Exim Bank and a consortium of bankers.Also, it will have to get the green signal of a high-powered committee, comprising representatives from the Commerce and External Affairs Ministries.The ECGC Chairman and Managing Director, Mr A.V. Muralidharan, said, “This (the fund) is a focus area for the Commerce Ministry. So we will soon contact the power companies.”

Electricity ring

India's plans to set up a pan-South Asia electricity ring that envisages interconnection with Bhutan entailing possible investment of $850 million (3,000 MW), a 400-kv transmission line at $50 million with Nepal, a 1,000 MW HVDC link with Sri Lanka costing $415 million and a 1,000-MW HVDC back-to-back link with Bangladesh at $220 million.

In Bhutan, there are plans to develop two more projects, besides sprucing up the existing power link. India had recently inked a pact to jointly set up a 1,320 MW coal-fired power project in Bangladesh and build a cross-border transmission link.Plans are already underway for setting up an undersea link with Sri Lanka. In Nepal, GMR and SJVN are setting up hydroelectric stations, while power trader PTC India Ltd has signed pacts to wheel power from two other projects.