MSEB, which has yet to pay the monthly bills of December, January and February to the DPC, has therefore failed to meet the deadline of March 8 set by the DPC for the renewal of L/C as per the provisions of the power purchase agreement (PPA).

MSEB sources confirmed this development and told The Financial Express that Canara Bank, which had provided L/C facility of Rs 135 crore for the Dabhol phase-I, had expressed its inability as MSEB was in deep financial crisis. "The bank, which has more exposure so far, has refused to take any risk at this point of time," sources said.

According to MSEB, it had pleaded for the renewal of L/C at a higher limit of Rs 368 crore as it had estimated that its monthly bill towards the DPC would increase to that amount after commissioning of block B (722 MW) of the phase-II in June this year. MSEB has projected that it would have to shell out over Rs 500 crore after commissioning block C (722 MW) of phase-II from December this year.

MSEB sources said that Canara Bank, which has an arrangement with the Bank of Maharashtra and Bank of India for the release of L/C at the time of call on from the DPC, would meet on March 12 to take stock of the situation and decide upon the MSEB's proposal for the renewal of L/C at a higher limit.

"Simultaneously, we have been holding talks with various other banks such as State Bank of India and Central Bank of India to provide a L/C facility of Rs 368 crore for the DPC bill payments," MSEB sources said. These sources however, admitted that its efforts to convince Bank of Baroda for this purpose has failed, as the bank's board of directors have decided not to accord such a facility.

According to MSEB, it would have to pay certain penalty to the DPC as per the provisions of the PPA, following the non renewal of L/C until March 8.