REC has inked a pact with Karnataka Power Corp (KPCL) and Bangalore Electricity Supply Company (BESCOM) to extend Rs 39,121 crore financial assistance to the power companies for the next 5 years.REC will provide Rs 27,121 crore worth loans to KPCL and Rs 12,000 crore loansto be extended to BESCOM.Power sector is currently undergoing a major transformation and REC is in the center of this transformation, said the company’s CMD PV Ramesh. REC is focusing on its assets and timely completion of projects. Gross non-performing assets are likely to fall going ahead to around 2.2 percent by FY17, he said. Net NPAs will touch 1.5 percent mark in FY17. The company’s restructured book in private sector is around Rs 10,000 crore. The loan book in next fiscal is expected to grow by 15 percent. Long-term plan is to double the loan book in 4-5 years. In FY17, disbursement is expected to be at Rs 60,000 crore.Below is the verbatim transcript of PV Ramesh's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal. Anuj: Are you getting sanguine about the power scenario in the state of Karnataka because that is a large sum that we are talking about?
A: We are sanguine about not only Karnataka but the entire country because power sector is undergoing a major transformation. The government has clearly defined the goals of what it wants to be by 2022 - that is a quality power for all, enhance substantially the generation capacity from the current 310 gigawatts to 540 gigawatts, modernise the entire transmission system and increase the renewable, add another 175 gigawatts capacity overall, create a green corridor, strength the transmission infrastructure both interstate and intrastate, create a national transmission grid and then essentially strengthen the distribution network, modernise them, bring in smart meters, separate the feeders. So a major investment is being made under Deen Dayal Upadhyaya Gram Jyoti Yojana which is a major flagship programme of the government and simultaneously under Ujwal DISCOM Assurance Yojana (UDAY), a complete restructuring and reform of the distribution company (DISCOM) is taking place, so obviously this would require an investment and an average investment of about Rs 15 lakh crore in the next five years and that is the estimated cost. However, REC being a major player in terms of financing, developing, supporting the state utilities, private sector and working across the value chain; transmission, distribution and generation and the renewable, we are obviously are at the centre of this transformational process.
Latha: Are people returning money because the big problem has been that DISCOMs are still settling their problems with the receivables from the state government. The UDAY bonds have just been floated but no distribution company (DISCOM) has put out a power purchase agreement (PPA); there are few and far between maybe one in four years or two in four years is all we have heard. What is the non-performing asset (NPA) situation? It fell little when you last reported. Will you see lower defaults in the current quarter?
A: We are focusing on our assets, the quality of the assets and the timely completion of the projects. However, with the figures that we have put out, our NPAs have fallen and they will continue to fall because we are taking a very constructive approach to each of these and actually at the end of Q4, when we report the figures, we would have much lower NPAs.
Latha: NPAs fell from 4,800 to 4,600 on December 31, when you reported the numbers. How much can we expect on March 31. Will it be 2 percent gross non-performing assets (GNPA)?
A: We are expecting around that level. In gross terms maybe about 2.2 percent and on the net it may be around 1.5 because of our consistent approach. It is not only REC among the peers has the lowest exposure in terms of NPAs or stressed assets. Actually if you look at the entire universe of the financial sector but even there many of us of these assets are also, we are one of the co-financiers, we are not the major financiers so we are working with our partners, with the co-lenders to see that we take them to a standard level. So there is a very consistent approach among us, internally within REC, working with partners.Sonia: You did speak about how your overall impaired loans have come down but within the private sector your impaired loans have gone up in the quarter gone by to about 46 percent from 44 percent earlier. Are you seeing any major stress there and what could the update be going ahead?
A: That is of general concern and the restructured asset amounts to about Rs 10,000 crore in the private sector but it is still the lowest among those who are in the power finance sector. However, there have been problems; some of them have been systemic in terms of fuel supply and gas based plant, there is a PPA issue. So those are being systematically resolved and the government level, there is a comprehensive approach to address these issues. We as financial institutions are addressing them. Our exposure overall is still small in the sector and we are working with the borrowers to salvage the situation. So let me make this clear, I do not believe the situation is as bad and I do not believe that we need to focus on this when there is so much that is happening in the overall power sector transformation whether it is modernising the entire system, exceeding power to the villages which didn't have power, electrifying every household in the country, which is nearly about 5 crore of them and modernising the DISCOMs, reducing the losses. I think there is a phenomenal transformation that is taking place.
For entire interview, watch accompanying video.
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