2 min read.Updated: 06 Oct 2021, 03:39 PM ISTLivemint
The Union cabinet has approved the marquee ₹3.03 trillion power discom reform scheme, wherein the Centre’s share will be ₹97,631 crore. The funds will be released to discoms subject to them meeting reform-related milestones, with REC and PFC designated as nodal implementing agencies
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NEW DELHI: Union power and renewable energy minister Raj Kumar Singh has directed India’s largest power sector lenders Power Finance Corp Ltd. (PFC) and REC Ltd to "carry out a strategic analysis to adapt to the changed business environment in the sector with an overall objective to deliver power to consumers at a reasonable cost."
This comes in the backdrop of the government leveraging PFC and REC Ltd to instill financial discipline at state-owned electricity distribution companies (discoms). They are also group companies after PFC bought a controlling stake in peer REC Ltd in 2019. The buyout of the government’s entire stake in REC Ltd by PFC cleared the decks for a $80 billion lending institution in 2019.
“R.K. Singh, Union Minister of Power and New & Renewable Energy reviewed the performance of REC and PFC Limited on 4th and 5th October 2021 respectively, in the presence of Minister of State for Power Shri Krishan Pal, Secretary Power and Senior Officers of Ministry of Power, with CMDs of REC and PFC and Senior Officers of these CPSEs," union power ministry said in a statement.
“The Minister highlighted Government’s vision is to make available affordable power for all 24x7. In this context, he stressed the need for improving competitiveness of both institutions with a view to increase their market share. He also advised that both the organizations should be nimble footed and dynamically adapt to the changing market needs, increasing renewables, and make efforts to reduce their cost of funds," the statement said.
PFC registered a 34% increase in net profit for the quarter ended 30 June to Rs2,274 crore. REC Ltd reported a 22% increase in its net profit to Rs2,247 crore during the same period.
“In this context, he advised PFC and REC to explore better and cheaper options for raising funds, including from offshore sources, with an overall objective of ensuring that the power sector value chain gets access to cheaper funds," the statement added.
The Cabinet Committee on Economic Affairs recently approved the marquee ₹3.03 trillion power discom reform scheme, wherein the Centre’s share will be ₹97,631 crore. The funds will be released to discoms subject to them meeting reform-related milestones, with REC and PFC nominated as nodal agencies for the scheme’s implementation.
“The Minister also stressed upon the need for speedy resolution of stressed assets, and suggested a slew of measures to both organisations in this context, which includes ensuring that the stressed assets are resolved at a fair value with a minimal haircut for PFC & REC and and in line with the national interests," the statement said.
The reforms-based result-linked power distribution sector scheme to be applicable till 2025-26 aims to reduce India’s aggregate technical and commercial (AT&C) loss to 12-15% from 21.83% in 2019-20, and gradually narrow the deficit between the cost of electricity and the price at which it is supplied to ‘zero’ by 2024-25.
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