Delhi government has given letters to power firms twice in pasthttps://indianexpress.com/article/cities/delhi/delhi-government-has-given-letters-to-power-firms-twice-in-past/

Delhi government has given letters to power firms twice in past

In May 2014, government had issued such a letter to Power Finance Corporation and REC for the discoms.

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However, according to the loan arrangement, the PFC had sought the LoC from the Delhi government.

Chief Minister Arvind Kejriwal has alleged that the then power secretary Shakuntala Gamlin, favouring the discoms, wanted the government to sign on the documents that would enable a Rs 11,000-crore loan to the Reliance ADAG Group-owned Delhi discoms. But such a facility is not something that automatically means trouble for any government.

In fact, at least in two instances, the Delhi government, being a 49 per cent stakeholder in the discoms, has given a letter of comfort to the financial institutions offering short term as well as long-term loans to the discoms. In May 2014, the Delhi government had issued such a letter to Power Finance Corporation and REC for the discoms to raise short-term loans of Rs 1,000 crore to power supplier dues in compliance of orders of the Supreme court. While in another instance, the government issued an LoC to NTPC in December 2011 for ensuring there was no regulation of power supply.

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Speaking to The Indian Express about the LoC, former Delhi Chief Minister Sheila Dikshit said, “There is nothing unusual (about the LoC being issued), as the Delhi government is a 49 per cent shareholder in the discoms. The job of these companies is to provide uninterrupted power. Therefore, if there is a requirement of loans to be raised by these companies, so that services are not hindered, the government should ensure that citizens get power.”

Dikshit said in any case, “if you feel suspicious about a government official, you always have the options to transfer them.”

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On the issue of speculations about hike in tariff due to the repayment of loans, Dikshit said, “Tariff hike is determined by independent power regulator. However, people who cannot afford to pay are being provided some relief through subsidy.”

The Indian Express had reported on April 15 that state-run lender Power Finance Corporation (PFC) had “in-principle” sanctioned them a loan of approximately Rs 5,000 crore. The PFC had determined a loan requirement of Rs 11,006 crore. The lender has sanctioned Rs 4,905 crore and the remaining would be syndicated through other financial institutions. The term of the loan is 7-8 years.

However, according to the loan arrangement, the PFC had sought the LoC from the Delhi government. This letter is issued to a lending institution by a parent company, acknowledging support of a subsidiary company’s attempt for financing. However, it does not imply that the parent company guarantees repayment of the loan being sought.