Is Government itself ‘sabotaging’ PDC’s growth?

Guarantee for availing loan for construction of Parnai power project awaited; REC’s Rs 21,800 cr offer may meet the same fate, say officials

Muddasir Ali
Srinagar, Publish Date: Jan 4 2018 12:02AM | Updated Date: Jan 4 2018 12:02AM
Is Government itself ‘sabotaging’ PDC’s growth?Representational Pic

For the past three years, the government has not provided its guarantee to the Power Development Corporation to avail the loan offer from a financial institution for construction of 37.5 MW Parnai power project in Poonch district.

The work on Rs 604-crore run-of-the-river project was started in 2014 and is scheduled for completion in early 2018. But so far, hardly 20 percent of work has been completed and that too has been managed by the PDC through is internal resources, said an official.

“There is a standing offer from at least three financial institutions to fund 70 percent of the total project cost in the form of loan, but the state government has been, for unknown reasons, not providing the guarantee to secure this loan despite the corporation having taken up the issue with the government at least thrice,” the official said.

A guarantee is an assurance by the government that in case of default by the corporation, it would own the liabilities. But in the PDC’s 30 years of existence, it has never defaulted on loan repayment—one of the reasons that financial institutions are ready to clear the loan for the project.

“It seems that at some level in the government, there is a ‘plan’ going on to sabotage the growth and expansion of the corporation. What else could be the reason for such long delays in clearing the guarantee, that too for an institution (PDC) which is owned by the government itself?” asked another official.

But Parnai isn’t the only worry for the corporation.

In the wake of the government’s reluctance to clear the guarantee for the project, there are apprehensions that a standing offer by the Rural Electrification Corporation (REC) to finance Rs 21,800-crore debt for four projects worth 3269-MW might meet the same fate.

The corporation, a public infrastructure finance company in power sector, had in 2016 offered to fund debt components for 1856-MW Sawlakote, 930-MW Kirthai-II, 390-MW Kirthai-I and 93-MW New Ganderbal, once the government completes all formalities to start the execution of the projects.

As per a preliminary assessment, these projects would require Rs 21,800 crore funding in the form of loan on 70-30 debt-equity ratio.

“Since J&K PDC is a grade-A utility and therefore is entitled to 100 percent exposure of REC’s net worth…and also REC has been associated with the JKSPDCL by way of financing Rs 565 crore for 450-MW Baglihar-I,  Rs 140 crore in 9-MW each Dah and Hanu projects, Rs 382 crore in 37.5-MW Parnai and Rs 403 crore in Lower Kalnai projects, it is therefore requested an opportunity may be given to REC for associating with these (four) projects by way of financing towards debt component,” reads a communication from the REC to managing director (MD) PDC, a copy of which is in possession of Greater Kashmir.

The PDC has completed all required formalities for execution of the four projects, which are now ready to be taken up for construction.  It owns 22 hydropower projects with a cumulative generation capacity of around 1210-MW. Most of these projects including 900-MW Baglihar-I and II have been set up by lifting loans from financial markets.

A senior official said that to avail REC offer, the PDC would require guarantee from the state government.

“But given the government’s approach, we fear that it would be a long struggle to convince them. We fail to understand this laidback approach,” he said.

The REC’s general manager for Jammu office Ajay Gupta said that while they had offered to fund both equity as well as debt in the form of loan for Sawlakote, the corporation was also ready to fund other three projects.

“But there was no response from the state government,” he said.

The REC, Gupta said, has been working with PDC for many years.

“They have a very good track record and have never defaulted on repayment of loans,” said Gupta. 

This isn’t for first time that the government has sat on clearing guarantee to PDC for securing loans for development of hydropower projects.

“We have had many such offers from financial institutions in the past but many times the government didn’t provide guarantee,” said the official. “We hope it will not happen this time when the Corporation is planning to execute projects worth 3000-MW-5000-MW in next three to five years.”

Minister for Power Nirmal Singh said they have sent proposal regarding loan offer for Parnai to the finance department for its clearance. He said that the department was looking into the other (REC) offer as well.