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Signing of India power generation project in Sri Lanka hits hurdle

Feb 18, 2011 12:20:54 AM- transcurrents.com

by Sanjay Dutta

NEW DELHI: The Sri Lanka Attorney General's office has raised 70 queries on basic issues at the nick of time, which has delayed signing of a deal for India's first overseas power generation project that has been in the works since 2006.

After years of negotiations, state-run National Thermal Power Corporation (NTPC) and Ceylon Electricity Board agreed on the nitty-gritties for setting up a 500 mw coal-fired power plant at Sampur in Sri Lanka's Trincomalee area as an equal joint venture. The NTPC board approved the agreement in July last year.

Sources said the CEB board too cleared the deal around the same time but did not officially communicate it to the Indian power generation major since it was yet to get the A-G's concurrence. Government sources said the A-G's office took four months —after CEB submitted the agreement for concurrence —to raise questions.

The queries pertain to such basic issues as Lanka government's budgetary support to CEB's equity, process of invoking government's guarantee, laws governing the joint venture and place of arbitration. "These are very fundamental to the understandings reached among NTPC, CEB and the Lanka government over the last two years and should not be reopened," one official said.

Not surprising then that the project's slow progress has drawn the attention of the Prime Minister's Office. The project has been billed as a major milestone in bilateral ties with foreign nations.

It also figured in the joint declaration issued during Lanka President Mahinda Rajapaksa's visit in June 2010. Subsequently, both governments also decided to speed up the project's progress during Lanka power minister's October 2010 visit.

The sources said the external affairs ministry has advised NTPC against responding to the queries for the time being.

In the meantime, the CEB has invited a team of NTPC executives for discussing the issues but is yet to offer a schedule. New Delhi had agreed to extend a $200 million line of credit on soft terms to enable the Lanka government to fund construction of jetties and other infrastructure near the project site. ~ courtesy: Times of India ~