India’s state utilities are notorious for their inefficiencies and massive losses. But a new initiative by two government-run firms could force them to reform.
Power Finance Corporation and Rural Electrification Corporation have decided to make lending to the utilities conditional.
A file photo of a power utility plant
They’ll have to adhere to five basic conditions including filing the previous year’s tariff order and getting the full subsidy payment from the government.
Then there will be nine other conditions within six months of the loans including automatically passing on fuel surcharges to consumers.
What’s more, for short term loans, their criteria includes tariff hikes. States including Delhi, Haryana, UP and Rajasthan have already accepted the new rules. And with costs of coal rising, utilities in these states may soon have to hike tariffs.
State utilities to face stiff conditions when they borrow; government may raise more; markets retreat after Monday’s gains.
Indian stocks retreated on Tuesday after the previous session’s gains.
The Sensex lost 97 points to finish at 15,874. And the Nifty fell 29 to wind up at 4,751.