REC, PFC not to give loans to discoms without loss-cutting plans

The two financing arms of the Power Ministry have been directed not to grant loans to distribuition companies (discoms) making heavy losses unless these submit time-bound plans for reducing such losses, the Ministry said on Thursday.

This follows a review here on Wednesday by Power Minister R.K. Singh of the functioning of the Rural Electrification Corporation (REC) and Power Finance Corporation (PFC).

"The Minister directed the REC and PFC not to grant loans to discoms making heavy losses, unless they draw up the road map for reducing the losses," a Ministry release said.

Speaking to reporters here after launching the National E-Mobility Programme on Wednesday, Singh said he had directed the REC and PFC to follow prudential norms when granting loans to discoms.

"When approving loans, our financing arms must look at the financials and the revenue stream of the borrowers," he said.

"If a borrower is running substantial T&D (transmission and distribution) losses, there should be no loan given unless the discom has a plan for reducing losses over a period of time and reports on how it is sticking to the plan."

According to the ministry, the time frame for reducing losses should not exceed 2 years, while action taken by the discom will be vetted by the Power Ministry "and only then will the grant of loan be considered for such discoms."

Singh noted that many discoms have been making heavy T&D losses, which severely handicaps their functioning and makes it difficult for them to repay loans.

"This measure will spur such discoms to reduce their transmission and distribution losses," the Minister said.

--IANS

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