Fitch Rating predicts slowdown in financing for power projects

According to a report from the global ratings firm, the funding needs of the sector over the next five years could be as high as Rs11,00,000 and at least 50% of this is expected to come from the private sector

Mumbai: Following the Reserve Bank of India’s (RBI) regulatory ceiling on individual or group lending and the prudential sector exposure norms, the amount of additional debt banks can supply to new power projects may be limited, reports PTI quoting Fitch Rating.

Despite the sustained gap between power demand and supply in India, funding for the country’s power projects is likely to continue to slow, the agency said in its report—‘Indian Power Project Financing: Numerous Factors Impeding Growth’.

“Impending lending constraints in the form of regulatory ceilings on individual/group lending laid down by the RBI and the prudential sector exposure norms, suggest the amount of additional debt banks can supply to new power projects may be limited,” the report said.

Further, heightened risk awareness of power projects, fuelled by environmental activism, fuel supply constraints, falling merchant power prices, land acquisition problems and the weakening credit quality of state electricity boards, is also contributing to the slower pace of funding, the report said.

The 12th Five Year Plan estimates fresh generation capacity of approximately 100,000MW.

According to the report, the funding needs of the sector over the next five years could be as high as Rs11,00,000 and at least 50% of this is expected to come from the private sector.

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