Indian states, which want to tap $11.9 billion of credit offered by the federal government, must plan first how to pay ₹1.17 trillion ($15.5 billion) of outstanding bills, according to people with knowledge of the matter.
The provinces planning to avail the program need to provide a timeline for payment of pending power bills and subsidies. Failure to comply will result in penal interest charges on the loan being offered by state lenders Power Finance Corp. Ltd. and its unit REC Ltd., the people said, asking not to be identified citing rules. The states will also have to guarantee the loan amount and interest payments.
The move was announced as part of Prime Minister Narendra Modi’s pledge to spend 10% of gross domestic product to revive an economy that is staring at its first contraction in four decades due to the world’s most stringent stay-at-home rules.
