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Home News Power Sector News Government clears Rs 8,400 crore interest subsidy fund for distribution sector

Government clears Rs 8,400 crore interest subsidy fund for distribution sector

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DistributionThe central government on 13-12-2011 approved Rs 8,400 crore interest subsidy scheme for power distribution projects in areas not covered under flagship rural electrification and distribution reforms' programmes. The Cabinet Committee on Economic Affairs designated state-run Rural Electrification Corp (REC) as nodal agency for the scheme that would offer subsidised loans worth Rs 25,000 crore for 14 years to distribution companies for network expansion and enhancement. The company would sanction the loans during 2012-13 and 2013-14, an official statement said.

Financial implications of the fund would be Rs 8,466 crore to cover payment of interest subsidy to borrowers, service charges to REC, payments to independent evaluators and other incidental expenses, it said. The scheme will become operational in about 12 months.

The subsidised loans would be offered to states that undertake reform measures like formulating turn around plan, reorganisation of electricity boards, auditing annual accounts and timely filing of tariff petitions.

Implementation of the scheme would result in reduction of distribution losses and improving financial health of distribution utilities. India's average technical and commercial losses are at 29.24%.

The Thirteenth Finance Commission projected aggregate losses of state distribution utilities at Rs 1,16,000 crore by 2014-15.

Investments in power distribution sector are being undertaken under flagship Rajiv Gandhi Gramin Vidyutikaran Yojana and Restructured Accelerated Power Development and Reforms Programme. The programmes cover towns with population of more than 30,000 or special category states with 10,000 people.

The scope of works and amount of investment in these schemes is not adequate for augmenting distribution network, system strengthening and upgradation.

Source- Times of India


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