Indian lenders paid a settlement amount of around Rs 5,000 crore (Rs 50 billion) to offshore lenders of the Dabhol Power Company on Friday.

After the settlement arrived at with General Electric and Bechtel last week, the stage has now been set for the debt recovery tribunal process, under which, assets are to be sold to a Project Special Purpose Vehicle.

The Project SPV comprising National Thermal Power [Get Quote] Corporation and Gail India Ltd [Get Quote], will work on restarting the plant that has remained shut since 2001. The government has set itself a target of restarting the plant by 2006.

An empowered group of ministers, which met on Saturday, also approved a one-time delegation of powers to National Thermal Power Corporation and Gail India Ltd, to allow their boards to make investments upto Rs 500 crore (Rs 5 billion).

Currently, the boards of these Navratna companies (profit making companies which are granted autonomy in terms of investment decisions) are empowered to make investments of upto Rs 200 crore (Rs 2 billion).

The limit, however, needs to be raised to enable the two companies to put in Rs 500 crore (Rs 5 billion) each into the Project SPV which will work on reviving the plant and LNG terminal.The NTPC Board met on Saturday to approve the Rs 500 crore investment in the project SPV.

The Gail Board is expected to meet on Friday, July 15 to clear the investment decision.Indian financial institutions, are meanwhile offering the government a loan at 9 per cent rate of interest.

The composite interest rate is around 8.7 per cent and with a 2 year moratorium, the actual works out to around 9 per cent, said a banker.

The loan would include an amount of Rs 500 crore loan for the project and an approximate Rs 5,000 crore worth of loans that the Indian FIs have bought out from offshore lenders.

Last weekend (2-3 July), the Centre had issued a guarantee of $ 300 million to the FIs for raising funds to buy out foreign lenders to the Dabhol Power Company, including Overseas Private Insurance Corporation.