PFC & REC to offer 10-year loans to state discoms at 9.5%

New Delhi: Power Finance Corp (PFC) and REC Ltd have decided to offer 10-year loans to state distribution utilities at 9.5% for the next 60 days under the ₹90,000 crore liquidity infusion package as the Union cabinet is likely to consider relaxing working capital borrowing limits of power distribution companies this week.A senior government official said that PFC and REC have fixed interest rates under the liquidity package at 8.75% for three-year loans, 9% for five year loans, 9.25% for seven years and 9.5% for 10-year term loans. The interest rates will be valid for the next 60 days.Electricity distribution companies of 8-9 states including Maharashtra for, Telengana, Andhra Pradesh, Uttar Pradesh, Meghalaya, Jammu & Kashmir and Tamil Nadu have expressed interest in borrowing the loans from PFC and REC for about ₹60,000 crore loans and are likely to complete documentation in 7-10 days.Uttar Pradesh is likely to approach the two lenders for ₹20,000 crore, Tamil Nadu for ₹18,000 crore, Telengana for ₹12,000 crore, Andhra Pradesh for ₹6,500 crore and Maharashtra for ₹5,000 crore. Some of these states have written to the Union power ministry for relaxation of the loan disbursement rules including easing borrowing limits, he said.76127658The Union Cabinet is likely to take up the National Tariff Policy- a sectoral reform in works for two years now — this week along with the borrowing limit relaxation proposal, sources said. The relaxation is required as most distribution companies are nearing their borrowing limits while some have already exhausted them. Sources said the government is considering relaxing the Uday limit to the extent required for borrowing under the liquidity infusion scheme, subject to a maximum of 35%-40%. The National Tariff Policy will provide for penalty on gratuitous load shedding and direct benefit transfer for subsidy.Currently, banks and financial institutions can lend only 25% of a discom’s revenue in the previous year as working capital. This restriction was imposed after clearance by the Union Cabinet at the time of Ujwal Discom Assurance Yojna (Uday) scheme.The liquidity scheme classifies discoms into three categories based on their working capital borrowing limits and state government receivables.

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