Government of India launched the National Electricity Fund (Interest Subsidy Scheme) in July 2012 to provide interest subsidy on loans raised by both public and private Distribution Companies (DISCOMS), for capital works sanctioned by financial institutions to improve the infrastructure in distribution sector during the financial year 2012-13 and 2013-14.
Projects worth Rs.10,953.80 Crores have been sanctioned by the Union Government to various Utilities/States for consideration of Interest subsidy benefit under National Electricity Fund.
Government of India has approved setting up of National Electricity Fund (Interest Subsidy Scheme) to provide interest subsidy on loans disbursed to the State Power Utilities, Distribution Companies (DISCOMS) – both in public and private sector for the loans taken from Private & Public Financial Institutions, to improve the infrastructure in distribution sector.
Rural Electrification Corporation (REC), would be the Nodal Agency to operationalise the scheme.
Under NEF scheme, interest subsidy would be provided on loans taken by private and public power utilities in distribution sector for non Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and non Restructured Accelerated Power Development and Reforms Programme (R-APDRP) projects.
The preconditions for eligibility are linked to reform measures taken by the States and the amount of interest subsidy is linked to the progress achieved in reforms linked parameters. The preconditions of eligibility are operationalisation of State Electricity Regulatory Commission (SERC), formulation of business plan for turn around of utilities, re-organization of State Electricity Boards (SEB), release of subsidy by State Government to DISCOMs, submission of audited annual accounts and timely filing of tariff petition.
There will be two categories of States for working out the interest subsidy– Special category and focused states, and States other than special category and focused states. Each power utility eligible for subsidy on interest would be assigned marks based on reforms measures i.e. reduction in AT&C losses; reduction in revenue gap (Average Cost of Supply (ACS) – Average Revenue Realized on subsidy received basis); return on equity and multi year tariff (MYT). Based on the consolidated score achieved on these parameters, the utilities would be categorized and will be eligible for subsidy in interest rates from 3% to 5% in States other than Special category and focused states and 5% to 7% in Special Category and focused states.