Power Minister R.K. Singh has directed Rural Energy Corporation (REC) and Power Finance Corporation (PFC) to not grant loans to distribution companies (DISCOMs) which are making heavy losses (above 15 per cent) unless they chalk out a plan to reduce them.

The minister noted that many DISCOMs have been making heavy transmission and distribution (T&D) losses and it may be difficult for them to repay the loans.

According to a statement issued by the power ministry, Singh’s directions came while he was reviewing the two financing arms of the power ministry – REC and PFC.

Singh directed the two institutions that before granting of the loan, either for capital expenditure or for non-capital expenditure, their adherence to the norms must be carefully observed.

Singh also added that in order to receive a loan, the loss-making DISCOMs should not only come up with a road map but also pursue them over a definite timeframe of not more than two years.

The DISCOMs must also show that they are taking action in accordance with the road map.  This will be evaluated by the Ministry of Power and only then will the grant of loan be considered for such DISCOMs.

Recently, Mercom had reported that the aggregate technical and commercial (AT&C) losses for the states and union territories under the Ujwal DISCOM Assurance Yojana (UDAY) program increased in the past one year.

According to the data provided by the government, as of December 2017, the AT&C losses in 24 of the UDAY states and union territories stood at 22.73 percent. Out of the participant states, the DISCOMs of nine UDAY states and union territories underwent a huge spike in AT&C losses. These states are: Chhattisgarh, Punjab, Jharkhand, Uttarakhand, Uttar Pradesh, Madhya Pradesh, Puducherry, Maharashtra, and Tripura.

27 states and 5 union territories have become participants of the UDAY program to date.