The loans are sought to be made available to Power Finance Corp (PFC) and REC Ltd, the two sectoral lending institutions in Indian power sector, for onward concessional lending to state electricity distribution utilities to help them clear bills of power generating companies.
The power ministry has sought bonds mainly normal as well as a special window provided by the Reserve Bank of India for large NBFCs, funds from institutions like EPFO, NSSF, LIC and multi-lateral agencies as well as external commercial borrowings, another official said. RBI last month announced Rs 50,000 crore capital support for National Housing Bank, National Bank for Agriculture and Rural Development and Small Industries Development Bank of India at 4.4% repo rate.
The official added that banks can lend 25% of their net worth to PFC and its group company REC. For raising a large amount of fund for the liquidity infusion scheme, the limits will have to be revised, he said.
As per the proposal, PFC and REC will launch a special loan product to specifically help discoms clear the power generators’ bills. The special loans from PFC and REC are proposed to be paid directly to power plants to clear over Rs 88,000 crore dues on behalf of the discoms.
The two companies will tap on liquidity infused in the banking system by the central bank as well as cheaper funds for which finance ministry nod has been sought. The Rs 90,000 crore scheme is likely to be implemented in phases spanning over a couple of months.
The special concessional loans are proposed to be given to discoms for a period of 10-15 years and are likely to come with a moratorium on principal. The loans will be secured with state government guarantees along with budgetary support under the state budget, the official said.
PFC and REC will pay the power plants on behalf of the distribution discoms and these will show as debt on the books of discoms. The states will have to agree to undertake commercial loss reduction trajectories, prepare proper energy accounting systems and action plans to reduce financial losses and bring in operational efficiencies.