Krishna Bhagya Jala Nigam gets LA plus

ICRA has assigned LA plus (SO) (pronounced LA plus structured obligation) rating to the proposed Rs. 600 crore long term bonds programme of Krishna Bhagya Jala Nigam (KBJNL). The rating indicates adequate safety and is based on a structured payment mechanism incorporating an unconditional and irrevocable guarantee from the Karnataka Government and creation of budgetary provision for payment of interest and repayment of principal. KBJNL will operate a no-lien escrow account for servicing the bond obligation. The structure also incorporates a time bound trigger mechanism for invocation of the guarantee in case of a shortfall.

Corporatisation of irrigation projects was started in Karnataka through the incorporation of KBJNL under the Company's Act in August 1994. The river Krishna is an inter-State river flowing through the three States of Maharashtra, Karnataka and Andhra Pradesh. Under the Krishna Water Disputes Tribunal, popularly known as the Bachawat Award, 734 tmc of water was awarded to Karnataka. Of this, the Upper Krishna Project (UKP) was conceived to utilise 173 tmc of water through construction of dams over the river at Alamatti and Narayanpur. UKP is a multipurpose project which aims to create irrigation potential of over 6.22 lakh hectares, a 297 MW power plant and other assets in terms of roads and drinking water facility. This is expected to benefit the three districts of Gulbarga, Bijapur and Raichur which are in the traditionally drought prone region of north-eastern Karnataka.

KBJNL took over the execution of the UKP in 1994. The cost of the project has gone up several fold since its conception, principally on account of escalation in rehabilitation and resettlement expenses. The project has also faced delays in execution. The present bond issue is for funding the balance portion of work on the UKP. KBJNL is empowered to collect water charges from the farmers. It is also allowed to collect royalty for supply of water to the power plant. However, receipts from these sources are unlikely to adequately cover the cost of the project.

Corporate Bureau

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