As the power plant developers are finding it difficult to get finances for their projects due to stringent loan conditions, Power Finance Corporation has eased some of its eligibility conditions for loan disbursals to power projects. This is an effort to revive the power sector which is passing though various crucial issues including scarcity of funds.
Earlier, in view of the challenges faced by the sector, PFC had set strict pre-conditions for loan disbursals to reduce its risks on loans that were already sanctioned. Since April 2011, the state-run lender had been disbursing loans to only those power projects that had signed power purchase agreements with procurers and also had assured fuel supply for the plant in place.
However, in the last three months, PFC has started disbursing loans based on the real development at the project. Instead of demanding for both fuel supply agreements and power purchase agreement, PFC is now considering the request even if one of these conditions are fulfilled.
The move was due to developers were not able to fulfil these conditions because state distribution companies are not inviting bids for PPAs and therefore changed the preconditions.
PFC has a target to sanction 45,000-crore loans, and disbursed loans worth 35,500 crore in 2011-12. The company would announce its results on May 22.
According to PFC:
Even if a power plant gets 50% of its fuel supply, lender would not have a default. Now with Coal India committing 80% supply, and projects running at 70-75% efficiency, there's no worry for lenders.
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