Fund to boost investments in T&D

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: The announcement on creation of a national fund for transmission and distribution is being viewed as a step which will facilitate accelerated flow of investments in the power sector, particularly transmission and distribution (T&D).

While the finance minister,

P Chidambaram did not give any further details on this fund, official sources said the scheme involves participation of the central government, CPSEs like PFC, REC, state governments and state power utilities. The corpus of the fund will be a whopping Rs 1,00,000 crore. The fund will provide the much needed financial support in the form of equity/interest free loan and concessional loans to states for creation and strengthening of various sub-transmission and distribution schemes across the country.

The working Group on power for

XI Plan has estimated capacity addition of over 1,19,000 mw, with an estimated investment requirement of over

Rs 10,63,000 crore including over

Rs 3,00,000 crore to strengthen and upgrade sub-transmission and distribution sector in the country.

On their part, the states neither have the requisite resource of their own nor the borrowing capacity. They are also hesitant to borrow at commercial rates as the repayment in most of the cases has to come out of reduction in AT&C losses which may not fructify to the desired level and the level of reduction in AT&C losses so achieved may not be able to service the commercial debt.

The lenders on the other hand

also perceive sub-transmission and distribution projects as high risk lending and are hesitant to lend because of the uncertainty of debt servicing and repayment. Therefore, most of the investment by the state utilities and

the private sector has been primarily

in generation segment and partly

in transmission.

However, distribution sector, which is the key for the growth and development of power sector as well as to maintain the GDP growth, remained neglected to a large extent over the years. The total fund requirement in distribution sector include over Rs. 51,000 crore under APDRP scheme and over Rs 51,000 crore under RGGVY scheme. The finance minister has also increased allocation under the RGGVY and APDRP for

2008-09 at Rs 5,500 crore and

Rs 800 crore respectively.