Cong yet to learn from Rajasthan debacle

The government's plan to perk up the infrastructure sector seems to have started with a bang. National Hydroelectric Power Corporation ( NHPC) has received a special line of credit of Rs 6,500 crore from Life Insurance Corporation (LIC) for funding its all on-going projects for a period of 19 years.

According to merchant banking sources, this is the largest line of credit offered by LIC to any of the infrastructure project.

Although NHPC had put up the proposal almost a year back, it got approved by the board of LIC this week. This funding will help NHPC to install additional capacity of 18,789 mega watt by 2012.

The facility will carry a floating interest rate, linked to government security of the underlying maturity. The interest rate is also linked to the rating of the enterprise. Accordingly, if NHPC gets downgraded, the interest rate spread will be hiked.

While the drawal is spread over up to 2012, the interest payments on this credit carries a moratorium up to seven years, thereby starting the interest inflows from 2012 onwards. In effect, the inflows will commensurate with the commissioning of the projects.

Last year, NHPC could save around Rs 250 crore by restructuring the interest rate to be paid on a Rs 2,500 crore loan from LIC from 9.25 per cent to 8 per cent to be repaid over 19 years.

It supplies power to 22 states and is in the process of recovering Rs 1,881.46 crore including a surcharge of Rs 732.80 crore.

However, with the implementation of securitisation scheme for one-time settlement of outstanding dues, NHPC has signed tripartite agreements with 19 states.

This has helped the company to realise Rs 2,027.20 crore during the current financial year up to October 2003, including receipts of bonds worth Rs 813.74 crore and Rs 213.39 crore as interest on bonds. As a result, the outstanding dues have dropped to Rs 549.50 crore till October 31, 2003.