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Power utilities to get cheap money

Calcutta, Nov. 4: In yet another move to rejuvenate the moribund power sector, the Power Finance Corporation (PFC) has decided to increase the loan amount and offer several other financial benefits—which includes reducing interest rates—to power utilities.

The extent of financing has been enhanced from 40–60 per cent to 70 per cent for all schemes being undertaken by state and Central utilities and municipal-run bodies. State entities in particular will get loans covering nearly 80 per cent of the project cost.

Similarly, interest rates have been brought down substantially. Loans offered by PFC will now attract an interest rate as low as 9.75 per cent. “It varies between 9.75 per cent to 12 per cent according to categories of projects and schemes,” senior PFC officials said.

“PFC has decided not to seek any commitment charges from government utilities on loans up to Rs 100 crore. Commitment charges on loans exceeding Rs 100 crore have been reduced to 0.25 per cent per annum from 1 per cent per annum, with a two-time revision allowed in the schedule effectively making the commitment to almost nil. Further, no commitment charges will be levied on the unutilised part of the loan after the closing date,” officials added.

The procedure of determination of the premium on premature repayment has also been modified. PFC will pass on 50 per cent of the premium to borrowers when structuring high interest rate debts.

PFC has also decided not to insist on state government guarantees under the Accelerated Power Development Reforms Programme (APDRP). Power ministry officials said that all these measures would help revive the Indian power sector, which is at the crossroads.

The government has chalked out an ambitious plan for providing affordable electricity to all by 2012. “This would need an investment of Rs 8,00,000 crore in the next 10 years. A capacity addition programme of this magnitude, which means doubling capacity in the next 10 years, is indeed a very challenging task, particularly so in the backdrop of our not-so-encouraging performance in the two preceding Plan periods. The average capacity addition in the last five years has been around 17,300 MW only,” officials said.

Out of the planned addition of 1 lakh MW, the state government and other utilities would have to add around 23,000 MW requiring an investment of around Rs 1,84,000 crore, while the remaining would be done by central or private sector utilities.

“PFC’s decision has brought good news to all the power utilities. The need of the hour is to restore the financial viability of the utilities so that this sector can attract private investments,” West Bengal State Electricity Board chairman G.D. Gautama said.

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