With the first phase of the 450-mw Baglihar hydel power project due for commissioning in September this year, the project is facing a fund crunch and needs additional central funds in the “next two to three weeks” to meet payment obligations of vendors and creditors.

The project has experienced a cost escalation on account of floods experienced in 2005 thereby increasing the project cost to Rs 5,200 crore, an escalation of Rs 1,200 crore.

These additional funds would be raised both in the form of additional debt (from banks) and additional equity coming in the form of Additional Central Plan Assistance (ACPA) from the Central Government.

Speaking to The Indian Express, Sundeep Nayak, Managing Director of Jammu & Kashmir State Power Development Corporation — the implementing agency of the Baglihar project — said progress on the project had not been affected on account of the additional funds needed for the project. He said the project was almost complete and that the additional funds needed were “in the pipeline”.

It is learnt that of the Rs 1,200 crore, around Rs 630 crore would come in the form of ACPA while Rs 570 crore would come in the form of debt from a clutch of banks/financial institutions led by Power Finance Corporation.

As the project is almost complete, the immediate need for funds is to meet

the payment obligations towards vendors and towards meeting interest payment obligations towards the debtors of the project (called interest during construction).

While the need for additional funds has been discussed and approved at the highest level, the power company is due to make its payments by the end of this month, or in two to three weeks. If these funds are not available by the time the payment obligations arise, then the company end up defaulting to its vendors and debtors.

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