Enhancing availability of a cheaper and clean fuel: Gujarat''s power sector is strongly dependent on more expensive naphtha supplies or relatively inferior coal brought from India''s central and eastern states. The project will strengthen availability of locally produced gas as fuel for power generation, city gas distribution, and for small industry. In addition to lower cost, increasing availability of gas offers advantages of promoting use of a more clean and convenient fuel in the state.

Promoting private sector participation: Since the early nineties, India has implemented strong policy changes to encourage private and foreign investment in its E&P sector. Although success remains moderate, a number of small local and foreign companies such as Niko have successfully entered the sector and seek to grow their operations. IFC''s investment in this project will help support a growing private sector role in the upstream hydrocarbons sector.

Direct economic benefits: The government will receive payments from royalties, production sharing and corporate taxes.

IFC Role: For a small private player in a sector dominated by public sector enterprises, IFC''s support to this project will help the company move to the next phase of growth in its operations in the country. Niko has generally not relied on long term debt in the past to support its international investments in India. Niko does not have an Indian subsidiary, based on tax considerations, and is unable to raise finance locally from Indian banks. Niko has sought IFC''s involvement, looking to our strong operating familiarity with the Indian environment, to support its current debt program.