Millennium Post

ECB norms for power cos eased

Liberalising the external commercial borrowing (ECB) norms for power sector, the Centre on Wednesday said companies can now use up to 40 per cent of loans to refinance their rupee debt, but the rest must be utilised for investments in new projects. Earlier, power companies were allowed to use only 25 per cent of the ECB to refinance their domestic rupee-debt loan.

Also, the government opened the ECB route for capital expenditure on the maintenance and operations of toll systems in the roadways and highways sector provided these are part of the original project.

Announcing implementation of the Budget announcements, Joint Secretary in the Finance Ministry (Capital Markets Division) Thomas Mathew said: “RBI is expected to issue relevant notifications within seven days giving effect to these Budget announcements”.

These are among the first of the announcements made in the Budget 2012-13 that are being implemented.

Giving details, Mathew said that power companies will now be able to raise ECBs for refinancing their rupee debt up to maximum limit of 40 per cent, "provided the remaining 60 per cent of the ECB raised is utilised for investment in a new project".

ECB, which totalled $35.9 billion in 2011-12, are considered attractive as cost of raising the loan is lower than that of domestic borrowings. Besides, ECBs give the borrowers an additional avenue to access to raise large amounts from global financial market.

The move would increase access to cheaper funds for companies in the power sector.
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