Sri Lanka and India coal project hit by legal queries

18 Feb, 2011

 

A state joint venture coal power plant between India and Sri Lanka which has been negotiated for several years has been hit by further delays following legal queries from the island nation, a media report said.

India’s National Thermal Power Corporation and Sri Lanka’s Ceylon Electricity Board has been talking on a 500 MegaWatt 50:50 joint venture coal plant in the Eastern coastal town on Trincomalee from 2006.

The Times of India newspaper quoting an unnamed source said Sri Lanka’s attorney general had raised 70 queries “on basic issues at the nick of time” delaying the signing of the deal.

India’s foreign ministry had “advised NTPC against responding to the queries for the time being,” the report said.

Sri Lanka is building a 900 MegaWatt fully CEB-owned coal plant with Chinese finance in the West coast reducing the urgency for a additional capacity. The first 300 MW stage is almost complete and is being tested now.

The Times of India report said queries on ‘basic issues’ included Sri Lanka’s government budgetary support for CEB’s part of the investment, government guarantees, laws governing the joint venture and place of arbitration.

But analysts say power purchase agreements, a key component of power deals in particular are complex documents running into several hundred pages and Sri Lanka’s power officials have earlier expressed unhappiness at some of the clauses in earlier deals.

The CEB is running massive losses partly due to its inability to pass on the costs paid to independent power producers.

Sri Lanka’s attorney general is also battling two cases of arbitration and court proceedings in three countries relating to a disputed energy deal relating to the island’s state run petroleum utility.

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