With credit rating firms assessing the impact of the mega PFC-REC merger on the companies’ credit profile, plans laid out by state-run power distributing companies’ (discoms) may come unstuck in the absence of adequate funding. Having been saddled with a ‘credit watch’ put on them by several ratings firms, both Power Finance Corporation (PFC) and REC (erstwhile Rural Electrification Corporation) have put the brakes on disbursements and sanctions for new projects, said officials.
The power financing companies lend primarily to power discoms and these loans are generally considered secure since discoms are owned by the states. Recently, however, the announced merger has put PFC and REC on the radar of ratings agencies which have put their credit borrowing programmes ‘on watch’. This has led to a slowdown in their loan disbursements which, analysts say, is set to have a direct knock-on impact on the economy at a time when banks and non-banking financial companies (NBFC) have shied away from lending to infrastructure in general and the power sector particularly.
