Cabinet nod sought for fiscal incentives to power projects

Shinde told the CCI that a special dispensation should be considered by commercial banks for UMPPs in respect of exposure limit as at the time of transferring the SPVs,all clearances are available and Power Purchase Agreements signed.

He said the commercial banks should be impressed upon by the finance ministry to increase the sectoral limits on power by at least 5 per cent (to help them lend up to 25 per cent). “Possibilities of setting up a power debt fund to meet the need for long-term debts should be explored. This would take over existing debt and release an equivalent amount for fresh lending to power projects thereby ease the existing exposure limit of banks and other financial institutions,” Shinde told CCI. He asked the cabinet to ensure that banks should earmark part of their funds to finance hydro projects in the Northeast and other difficult terrains in Jammu and Kashmir,Uttaranchal and Himachal Pradesh to facilitate financial closure of large hydel projects by extending long-term debt with low interest.

The minister has also suggested that exposure limits of banks for lending to Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) be enhanced to 25 per cent from the current 15 per cent. The banks should be asked to consider only a certain percentage of say 50 per cent of total funding to PFC and REC as power sector exposure while determining their industry exposure norms,he suggested.