Financial Daily from THE HINDU group of publications
Thursday, Jun 13, 2002
Industry & Economy
TN industry looks to more from CM
CHENNAI, June 12
WITH an almost entirely new team, including the Chief Secretary, in place, will the Chief Minister, Ms Jayalalithaa, now move forward in taking decisions on crucial issues and projects that have been in a limbo for sometime now, is the question being asked in industry circles.
A bureaucratic shake-up was in the offing for sometime, especially since Ms Jayalalithaa returned to the helm of affairs last March. A couple of things delayed the transfers. One, the Government had to prepare the Governor's address and then present the Budget. The Budget session went on till mid-May after which it was time for by-elections to the three Assembly constituencies.
With all these out of the way, Ms Jayalalithaa went ahead with the transfers, which many believe is only the first phase, of the shuffle of a large number of IAS officers, including those heading the key departments of Finance and Industries.
Industry circles point out that decisions on some major proposals have been pending for a long time and the Government should look into these without any further delay. These include the Ennore LNG terminal-cum-power project, the Jayamkondam lignite-based power project, a decision on going ahead with the second phase of the Tidel software park, for which the State Government is expected to sign a MoU with JTC of Singapore, as also the Tatas' proposal for a titanium project in the State.
The Ennore LNG project, a competitively bid project that was awarded in 1998 when the DMK was in power, has met with protracted delays both at the State and the Central level. The project envisaged a 2.5-million-tonne-per-annum LNG terminal and a 1,850-MW power plant, with the excess gas being sold to industrial and other consumers. However, a year after awarding the bid to the Dakshin Bharat Energy Consortium that included the Aditya Birla Group, CMS Energy and Unocal, both of the US, Siemens of Germany and Woodside Petroleum of Australia, the Tamil Nadu Electricity Board (TNEB) - the sole buyer of power from the project - said it would not be able to absorb all the power generated from the plant nor would it be able to pay for it.
The project was then made a multi-State one, with the Power Trading Corporation buying the power and selling to States. It got stuck at this stage because the Centre was not able to come with a payment security mechanism that would satisfy the lenders. Then was mooted the idea that the project size be scaled down to 1,100 MW so that the TNEB could buy it fully. However, here too the issue is one of evolving a payment security mechanism that would satisfy the lenders.
With CMS Energy already expressing its intention to quit project development in India (it has stakes in three other independent power projects) it is not long before other members of the consortium too decide to call it quits, considering the delays that the project has gone through. The contracts for both gas and equipment may no longer be available at the original price they were signed up for. Originally, the project was to achieve financial closure by December 2000 and full operational status by 2003. The project has not yet achieved financial closure.
The other power project, the 500-MW lignite-based integrated mining-cum-power project, for which a Reliance-led consortium bagged the contract, is also stuck for want of a suitable escrow mechanism from TNEB.
The TNEB's stand is that it will be in a position to decide on providing escrow once the ruling in the arbitration proceeding involving the 1,050-MW Videocon power project is known. The ruling is expected in August, according to reliable sources.
Meanwhile, TNEB itself is contemplating signing an agreement with the National Thermal Power Corporation for a 1,000-MW coal-based power plant at Ennore, using the external coal handling system at the Ennore Port that was put up for TNEB's use as well as for the Videocon power project. TNEB is also planning to rope in the Neyveli Lignite Corporation (NLC) to put up a 500 MW plant at Tuticorin. The plant was originally meant to be put up by TNEB itself, but considering the current funds constraints, the board is thinking of doing it as a joint venture with NLC.
Apart from the two power projects, the Government has to decide on the Tatas' proposal to invest in a titanium dioxide project in the State that was mooted as far back as September 2000. The project entails an investment of about Rs 2,000 crore over a five-year period and involves separating illuminite and rutile from the mineral grade beach sand in Tuticorin district. These will then be processed and enriched for producing titanium dioxide, which finds application in the pigment and paint industries. The project is to be executed by Tata Steel and other group companies.
Besides, an early decision is awaited on the Government's proposal to sign up with the JTC of Singapore for joint development of the second phase of the Tidel software park. Even though demand for office space from the IT industry may not be as high as it was when the Tidel Park was inaugurated in July 2000, sources say the process has to be initiated now itself for the project to fructify at least two years later, by which time demand is expected to pick up.
The Government has announced its intention to disinvest its stake in public sector undertakings, of which there are more than 50. The industry is eagerly looking forward to see how the Government goes about doing this. The Government has announced that it will set up a disinvestment commission.
Another pending issue is restructuring the Tamil Nadu Industrial Development Corporation, a proposal that has also been kept on the backburner much before the AIADMK came to power in May 2001. The policy for the manufacturing sector, promised by the AIADMK Government, is also awaited.
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