The acquisition of Rural Electrification Corporation (REC) by Power Finance Corporation (PFC) may result in further straining the power distribution utilities that are struggling to pay the bills raised by generating companies.
After a ratings downgrade, the power sector financing companies are facing higher borrowing costs. According to officials in the know, the higher borrowing costs have a trickle down effect on their ability to lend to Discoms.
In December 2018, the Union Cabinet gave an in-principal approval for the strategic sale of government’s 52.63 per cent stake in REC to PFC. Prominent credit rating agencies immediately red flagged the move.