Discoms making huge losses won't get loans: R K Singh

All those power distribution companies (discoms) making losses above 15% will not receive any loans from the Ministry of Power.

Minister of State of Power and New & Renewable Energy R. K Singh has directed Rural Electrification Corporation and Power Finance Corporation, the two financing arms of Ministry of Power to check the financial health of the discoms prior to sanctioning and disbursing loans.

This decision was taken during a review meeting held with these two companies.

If a discom is making heavy losses, unless they draw up a road map for reducing the losses it is unlikely the company will receive any loan from Rural Electrification Corporation and Power Finance Corporation. The roadmap should be for a definite time frame of not over two years and should be able to display adherence to the road map.

After the Ministry vets the adherence, only then the discom will receive a loan.

“The Minister directed the two institutions that before granting of loan either for capital expenditure or for non-capital expenditure, the adherence to prudential norms must be carefully observed. He noted that many distribution companies have been making heavy transmission and distribution losses and it may be difficult for them to repay the loans,” read a statement by the Ministry of Power.