India's Power Minister RK Singh has directed state-run Rural Energy Corporation Ltd. and Power Finance Corporation Ltd. not to grant loans to distribution companies which are making heavy losses until they draw up a road map for profitability.
Singh undertook a review meeting of the two financing arms of the power ministry – REC and PFC – yesterday, the power ministry said in a statement. It said Singh 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.
Many discoms have been making heavy transmission and distribution losses and it may be difficult for them to repay their loans, he said. The loans, he added, should not be granted until and unless they draw up a road map for reducing losses over a definite time frame not more than two years.
He further said that it will be vetted by the power ministry and only then will the grant of loan be considered for the discoms.
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