BANGALORE, DECEMBER 16: The Karnataka cabinet today decided to form a high-level committee to look into Cogentrix company's demand for `escrow' account cover to its project by the state electricity board but skipped discussion on its major condition to commit the state to the 1997 Power Purchase Agreement (PPA)Briefing reporters, State Information Minister B K Chandrashekar said terms of reference of the committee headed by Dr Deepak Parekh, an expert on energy and power finance, had not yet been drafted but indicated that it would examine the ``impact of the power project on escrow account''.The Karnataka government was taking a ``comprehensive look at the present situation, prompted mainly by the demand for escrow account'', he said, adding that the cabinet did not discuss its stand on the PPA. The company had written to the state on Wednesday seeking escrow cover, he said.Ron Somers, managing director of Mangalore Power Company (MPC), set up to execute the project by its promoters Cogentrix and China Light and Power, had, on Wednesday, set two conditions for his company to reconsider its decision to pull out of the 1,000 mw, $ 1.3 billion thermal power project near MangaloreSomers had demanded that the Karnataka government again commit itself to the 1997 PPA and that the Government of India provide a draft of the counter-guarantee on a time-bound schedule. On the second condition imposed by MPC, Chandrashekhar said the matter of counter-guarantee had been pending with the central government ``for some time and we are awaiting the decision''.Since the question of escrow account arose after the state government had agreed to the PPA in November 1997, this issue would be separately examined by the high-level committee, for which no time frame had been set to submit its recommendation, he said.Chandrashekhar said a major concern of MPC was the escrow cover and the committee would decide the extent of escrow fund for the project. The issue would be decided on the basis of the committee's recommendations.Asked if the government was having second thoughts on the project, he replied in the negative.The committee comprises Dr R Narasimha, director of the National Institute of Advanced Studies, B G Rudrappa, former chairman of the State Electricity Board, the state Chief Secretary and principal secretaries of finance and energy departments.Escrow account would be equivalent to the cost of energy that would be produced at 1,500 mw, the limit set for KEB. The state electricity board which contributes to the account had already provided the escrow cover to some central and state utilities.
