Multilateral agencies keen on direct loans

Multilateral funding agencies are increasingly eyeing direct lending to public sector utilities, without central guarantees.

The Asian Development Bank, after finalising a loan agreement for $300 million with NTPC Ltd, is now in talks with Power Grid Corporation of India for a loan agreement of around $600 million. Other power companies like Power Finance Corporation are also in the reckoning for such loans.

Power Grid has applied for a fresh loan of $600 million from ADB, apart from the loan agreements for $925 million that it has signed with the agency till now.

"ADB executives will be in town this month to work out the details and we are confident that the agreement for this loan will be signed between 8 and 12 months," a senior Power Grid executive said.

The proposal has already been sent to the government and the final decision will be subject to its clearance.

NTPC had recently signed a loan agreement for $300 million with ADB under the bank's Complementary Finance Scheme (CFS).

Under the facility, an amount of $75 million will be extended directly by ADB and $225 million was syndicated by Banc of America Securities Asia Limited, the participation arranger appointed by ADB.

Finance ministry officials said the government had recently informed multilateral agencies that any direct lending to state-level public sector units would not get central guarantees.

"We are constrained by the Fiscal Responsibility and Budget Management Act and cannot issue central guarantees beyond a certain limit," the official added.