August 27, 2021


Business and Funding News

Energy Ministry wants RBI to instruct banks to follow strict rules –

Energy Ministry wants RBI to instruct banks to follow strict rules –

The new bailout scheme for decomposition companies relies heavily on private investments in distribution infrastructure.

Since losing (hassle) power distribution companies are a sticky burden on government finances as they need recurring rescue packages, the Union government leaves no stone unturned when it comes to ensuring that the latest package to save these entities do not hesitate. his financial indiscipline and operational laxity.

The Union Energy Ministry plans to ask the Reserve Bank of India (RBI) to direct public sector banks (PSBs) to follow strict prudential rules when it comes to lending to disk companies, it said on Friday. Energy Secretary Alok Kumar. Prudential rules for PFC-REC, the main source of trouble lending, have already been tightened, and public sector banks will be required to follow similar standards.

According to sources, outstanding disk loans amounted to Rs 5 lakh crore at the end of fiscal year 20, and more than a fifth of this is in the form of loans from the state government.

The Union’s energy minister, RK Singh, had previously told FE that, ‘under the revised rules, record companies will be able to obtain new loans from PFC-REC only if they chart a path for loss reduction that is approved by their respective state governments and also by the Union. ministry of power ”.

There is also a plan to include PFC-REC representatives on the boards of the discoms to which exposure from sector-specific lenders is great, Kumar said while addressing a workshop on the latest discom scheme hosted by the Forum. of Energy of India.

Funding under the latest Rs 3-lakh-crore breakdown reactivation scheme approved by the Cabinet in June is dependent on committing to undertake the creation of infrastructure such as separation of feeders and replacement of old lines. The scheme also requires interested state governments to agree to pay subsidies on time, settle government fees, and state electricity regulators to implement annual rate reviews and not create ‘regulatory assets’ or recoverable decomposition expenses that regulators recognize. such as transfer costs, but they are not immediately incorporated into the rates.

The new bailout scheme for decomposition companies relies heavily on private investments in distribution infrastructure. For the scheme to be implemented in the five years to fiscal year 26, the Center will disburse Rs 97,631 crore, with the remaining funds to be leveraged by the riots through various means, including loans, but ideally through modality companies. public-private partnership.

The latest attempt to relive losses and debt crises through the so-called UDAY scheme launched in November 2015 failed to meet its targets after showing some initial promise in instilling discipline in shock operations. The UDAY program aimed to reduce aggregate technical and business (AT&C) losses from breakdowns to 15% by the end of fiscal 2019, but it did not. AT & C’s losses are now 21% and the latest scheme aims to reduce them to 12-15% by fiscal year 25.

Breakdown losses had increased from Rs 48,619 crore in FY16 to Rs 61,360 crore in FY19. Energy Minister RK Singh has said that losses fell 38% year-on-year by around Rs 38 billion in fiscal year 20. As breakdown income fell in fiscal year 21, due to disruptions in Through the shutdowns to contain the coronavirus, some agencies consider breakdown losses to have risen to Rs 90 billion. However, the Energy Ministry has described such estimates as “excessively inflated”.

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