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PFC, REC may restrict funding to power projects based on Chinese equipment

The government’s economic response against China may see public sector financiers restricting funding of projects


Sentinel Digital DeskBy : Sentinel Digital Desk

  |  30 Jun 2020 7:34 AM GMT

NEW DELHI: The government's economic response against China may see public sector financiers restricting funding of projects that ise equipment from the neighbouring country, sources said on Monday.

The practice would first be adopted in the power sector, where state-owned Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and Indian Renewable Energy Development Agency (IREDA) propose to restrict financing to states that are developing projects in power generation, transmission and distribution that use Chinese equipment.

As bulk of the funds to the power sector is provided by these three institutions, the restriction is expected to be effective in checking large-scale import of Chinese gear. The move is likely to affect solar sector projects the most where Chinese import is to the extent of 80 per cent.

Sources in the Power Ministry said that public sector financiers have been told to devise funding schemes that discourage imports, especially in case of equipment that is being manufactured in the communist country. This could be done by either completely restricting funding to projects based on imports or such projects could command a premium interest rate.

"We are looking at how this can be achieved. Various things are being worked out that would be conveyed to agencies looking for funds," said an official source from one of three public sector power financiers.

Last week, power and Renewable Energy Minister R K Singh had said that state-owned power sector is looking to structure financing in such a manner that lower rates of interest will be charged on developers who use India-manufactured equipment. This would promote the idea of Atmanirbhar Bharat and also give further boost to domestic manufacturing. (IANS)

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