Power Finance Corporation (PFC) pushed its primary mandate to backseat and started indulging in profiteering like a private corporate unmindful that it will lead to higher tariff for electricity consumers.
PFC was created by the government as a specialised institution to support the development of the domestic power sector by providing funds to developers at a reasonable interest rate.
For example, the company’s borrowing cost rose by just 9 basis points in the second quarter of the current financial year, but its lending rates increased by 39 basis points. Unsurprisingly, its profit after tax (PAT) in the quarter went up to Rs 638 crore from Rs 329 crore in the same period of the previous fiscal.
To put it in the right perspective, the Corporation?s credit ratings are at par with India’s sovereign ratings. It is because of the strong support from the government that the public sector financier is able to mobilise resources from domestic as well as overseas sources at an interest rate that would be envy of any top-rated private company.
Under the tariff determination guidelines set out by the CERC, interest costs have to be taken into account while fixing tariff for a power project. That means higher interest cost will lead to increased tariff for a power project.