PFC doesn't fear loan defaults by power firms

Power Finance Corp (PFC) on Tuesday said there is no fear of loan defaults even as private sector power producers are preparing to meet the prime minister and top union government ministers to discuss their concerns over fuel, tariff and land acquisition hurdles which could curtail private investment in the sector.

PFC had sanctioned Rs75,000 crore for the sector last fiscal.

"There is no product where you can assume that price will keep on going up for next 25-30 years and still there will be no alternative. What they (companies) are assuming is an average increase of 11-12 per cent will happen for 25 years. That's not possible," The Economic Times quoted PFC chairman Satnam Singh as saying.

He said power generation capacity in India had expanded rapidly in recent years while the mining, fuel and transport infrastructure have not been able to keep pace. But every sector cannot grow at the same pace, and eventually there would be a balance, he said.

PFC, the prime lender to power sector, said companies could avoid defaults even if Coal India Ltd, the state-owned producer, supplied half the fuel it has promised. If companies import some coal to run their plants at 70 per cent capacity, they can easily repay loans, he said. This will impact profitability of investors in the short run but financials would improve once coal prices fall internationally, he added.

Coal supply in the country was bound to grow given the demand and the 109 billion tonnes or so of proven reserves in the country, Singh said; but he admitted that decision-making on the power producers' woes should have been quicker.

The country is likely to add over 52,000 MW of generating capacity during the 2007-12 Plan period against 21,000 MW in the previous Five-Year Plan. This is lower than the 62,000 MW target fixed by the Planning Commission after a mid-term review. Private power companies are expected to add 24,372 MW of capacity in the five years ending March this year against a target of 18,747 MW envisaged by the commission.