Two months after India announced a Rs 900 crore ($12 billion) loan program to aid power distributors punished by the pandemic, only a fraction has been utilized as many state applications have yet to meet the lending requirements, according to people familiar with the matter.
The loans, announced by Finance Minister Nirmala Sitharaman, are among a raft of measures aimed at reviving an economy that’s forecast to contract this fiscal year for the first time in more than four decades.
Meanwhile, India’s electricity sector, already burdened by perennial losses and unpaid bills, is now seeking to recover lost cash flow after efforts to tame the coronavirus pandemic caused a sharp drop in power demand.
Power Finance Corp. and REC Ltd., the two state-backed firms lending the funds, have disbursed a combined Rs 112 crore as of Tuesday, said the people, who asked not to be named as the information isn’t public. Most states have shown interest in the program and have applied for loans, the people said, with applications so far totaling Rs 673 crore.
“The loan scheme has progressed slower than expected, mainly because of procedural delays in states and stringent conditions that states are finding difficult to agree with,” said Rupesh Sankhe, an analyst at Elara Capital India Pvt. in Mumbai.