Minister of state for power Y K Alagh yesterday sought the finance ministrys help in bringing about changes in the Reserve Bank of Indias (RBI) norms relating to term loans and bank guarantees for the independent power producers (IPPs).
Contesting the finance ministrys opinion that the power sector did not have enough absorptive capacity, Alagh said here that such a belief is wrong. I have told the finance ministry that not much investment was made during the eighth plan period and, therefore, there is shortage of projects.
Reminding that the Planning Commission had agreed to making power a fully funded sector, he said due to RBI norms, public sector banks treated the bank guarantee given to the private power projects same as term loan.
If all the money goes to bank guarantees than where will be funds for executing the projects, he said, pointing out that the financing needs of the private projects, totalling at least 17,000 mw, had to be catered.
He said that finance minister P Chidambaram had said at a recent infrastructure meeting that difficulties relating funding of power projects would be worked out soon.
Alagh said that the Central Electricity Authority (CEA) had already cleared 25 projects for a total capacity of 14,100 mw and another eight projects for 3,026 mw capacity were on advance stages of clearance.
Identifying funding as one of the main problems, Alagh, however, refused to assess the loan requirements of the IPPs during the ninth plan period, saying debt-equity ratio in such projects come to 3:1 normally.
The power ministry is working on a full financial flow of resources for power projects, he said and sought facilities from banks and other financial institutions for funding of the debt portions of these projects.
He said the Central sector capacity addition target for the ninth plan was 12,000 mw, in addition to the slippage of about 1300 mw in the eighth plan period.
Alagh said even the public sector National Thermal Power Corporation (NTPC) were earlier stopped from investing their profits. We are now pushing them ahead. We want NTPC to go ahead to make investments in new projects. While it has the necessary equity and internal resources, the debt portions will have to come from the financial institutions.
