Discom bonds will not be force-fed to PFC and REC -Governance Now

Discom bonds will not be force-fed to PFC and REC

Power minister estimates saving of nearly $30 billion

gb | November 10, 2015

#electricity #piyush goyal #power finance corporation pfc

GN Bureau
New Delhi

Union power minister Piyush Goyal has said that the implementation of the revival package of the near bankrupt state-run discoms will result in total savings of nearly $30 billion (nearly Rs 1.99 lakh crore) by FY18-19.

Goyal assured that the state-run Power Finance Corporation and Rural Electrification Corporation, which have an exposure of around $20 billion (Rs 1.33 lakh crore) to the discoms, will not be forced to buy the bonds to be issued by the respective states under the scheme at 8-8.5% yield. He also said this is aimed at protecting the balance sheet of PFC, which gets loans at 7.5-8%.

"We will not stress PFC and REC's balance sheets with these bonds which will be priced at 8-8.5%. It could only affect their working capital requirement," he said, adding this is the reason why the government will be selling these bonds in the market.

Claiming that there is a huge appetite in the market for such bonds as the renewable and transmission sectors are doing well, the minister said he has already spoken to pension funds, provident funds and insurers.

He said once the scheme is implemented PFC and REC can unlock their $20 billion (nearly Rs 1.33 lakh crore) exposure and invest further in projects.
"I believe they (PFC and REC) can even expand their loan book in the next two to three years. Both can fund up to $60 billion (Rs 3.99 lakh crore) in the next five years in fresh investment," Goyal said.

The banking sector has a huge exposure to the near bankrupt state-run discoms to the tune of Rs 4.3 trillion in principle alone, and over Rs 5 trillion if interest and unpaid dues are counted. These discoms have accumulated losses of about Rs 3.8 trillion.

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