Spotlight on PFC’s funding of unviable coal projects

Despite several of its loans to coal-fired power projects turning bad, public sector lender Power Finance Corporation and its subsidiary, Rural Electrification Corporation, continue to fund such projects — even though they are clearly not viable. This is the finding of a study by the Cleveland, US-based Institute for Energy Economics and Financial Analysis (IEEFA), an environmental advocacy think-tank which analyses financial and economic issues related to energy and environment.

“IEEFA views PFC’s lending to new existing or new thermal power developments extremely risky in the light of the expected tariffs on these projects being 60-70 per cent above the prevailing renewable energy tariffs of ₹2.50-2.80 a kWh. IEEFA questions how PFC can expect to get a viable total project return over the 40-year life of thermal power plants, given the uncomptetive tariffs these projects require,” the Institute’s research paper says, pointing out that the electricity sold by these thermal power projects is purchased by state-owned electricity distribution companies that are broke.

Risky loans 

IEEFA notes that PFC’s consolidated accounts show non performing loans of ₹47,454 crore, making up 7.4 per cent of gross loan assets. The research note says that 29 projects funded by PFC are NPAs, and most of these projects are coal-fired power plants. It does not name all the 29 projects, but gives a few examples.

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