State electricity distribution companies (discoms) can claim interest subsidy under the National Electricity Fund on up to Rs 14,000 crore worth loans this fiscal. In 2012-13, the Power Ministry sanctioned subsidies on loans worth Rs 11,000 crore under the Fund. The subvention was provided to 11 discoms across eight States.
The National Electricity Fund was set up to spur investments in the electricity distribution network. The fund offers three to five per cent discount on interest for long-term infrastructure loans borrowed by discoms. The scheme is open for both State-run and privately-held utilities.
The electricity fund is different from the Financial Restructuring Package (FRP) unveiled by the Centre to improve the financial health of utilities.
“FRP is only for short-term liability that has a cut-off date. But, National Electricity Fund is a long-term investment to strengthen the distribution system,” said a Senior Power Ministry Official.
The preconditions for eligibility are linked to certain reform measures taken by the States and the amount of interest subsidy is based on the progress achieved on parameters spelled out in the measures.
The Rural Electrification Corporation Ltd is the nodal agency for the national electricity fund.
The discoms have to first get the loan and then approach REC for the subsidy .
The REC then examines the discom’s ability to meet the targets and recommends it to the Power Ministry.
If qualified, the discom can claim the incentive after a year.
On December 13, 2011, the Cabinet Committee on Economic Affairs had approved the setting up of the National Electricity Fund.
The financial implications of the National Electricity Fund would be interest subsidy aggregating to Rs 8,466 crore spread over 14 years for loan disbursement amounting to Rs 25,000 crore for distribution schemes sanctioned during the two years (2012-13 and 2013-14) .