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PFC, REC Likely to Resume Short-Term Loans to Discoms

  • State-owned power distribution companies feeling financial squeeze are expected to get some relief soon. Power sector financing majors, like Power Finance Corporation and Rural Electrification Corporation, are set to resume short-term lending to discoms.ources said the power ministry has issued revised norms for these non-banking finance companies (NBFCs) to sanction short-term loans to discoms. Following that, these NBFCs have moved to examine pending loan proposals, which will now be evaluated on the basis of revised guidelines. These companies are sitting on loan proposals worth R4,000 crore received from various states.
  • “We have received loan proposals of R2,500 crore from states like Uttar Pradesh, Haryana, Punjab, Rajasthan and Tami Nadu and will evaluate them on the basis of new guidelines,” PFC chairman Satnam Singh told FE.Loan proposals of R1,500 crore are lying with the REC. “We are going to examine these proposals soon,” a senior REC official said.Timely tariff revision, regular payment by state governments on account of subsidy to agriculture sector, electricity consumers and submission of audited accounts of the preceding fiscal by September are key among the revised lending guidelines.With NBFCs resuming lending to discoms, banks are also expected to follow suit. Sources said leading public sector banks including Central Bank recently held a meeting with senior officials from states like Rajasthan, Uttar Pradesh and Tamil Nadu to discuss new norms for giving short term loans to discoms.These NBFCs put a moratorium on loan sanctions to discoms early September following a directive from the administrative ministry.
  • The ministry issued the directive after it was found by the Shunglu committee that discoms were using loans to finance their cash losses resulting from non-revision of tariff. The discoms’ combined losses are estimated to have crossed R1.5 lakh crore. In the financial year 2010-11 alone, discoms incurred losses of R42,000 crore after excluding the subsidy payment received on account of power supplied to the agriculture sector.The committee was set up by the Planning Commission early this year to study systemic issues impacting financial health of discoms. It is expected to submit its final report in a week.

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