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Government Schemes


NEF Scheme

The Distribution Sector is the most important link in power sector value chain as it is the touch point of the entire power sector with the end consumers. A technically efficient and financially viable Distribution Sector ensures revenue realization which is a key factor in providing stability to the entire power sector. It was however observed during the XIth plan that actual expenditure in the Distribution sector was much below the estimates, resulting in huge funding gap.

Taking cognizance of the same, the Government of India approved creation of National Electricity Fund (NEF) through budget declaration, which was operationalized through office memorandum dated 14th March 2012 and guidelines regarding implementation of the same was notified through office memorandum dated 05th July 2012.

Objective of the Scheme:

The scheme envisaged mitigation of the funding gap by providing interest subsidy, linked with reform measures, on the loans taken by power utilities for various capital works under Distribution projects. The scheme would provide interest subsidy aggregating to ₹ 8,466 crore spread over 14 years for loan disbursement amounting to ₹ 25,000 crore for distribution schemes sanctioned during the 2 years viz., FY 2012-13 and FY 2013-14. The projects sanctioned by the lenders shall be considered by the Steering Committee during FY 2012-13 and FY 2013-14 provided no disbursements has been made by the lenders under these projects prior to submission of proposal to the Steering committee. One of the differentiating factors for the NEF scheme was that private distribution utilities were also eligible to avail subsidy, but none have applied to the scheme.

Scope and Eligibility under the NEF:

The tenure of loans for eligible entities and projects under the scheme had a ceiling period of 13 years i.e., interest subsidy could be extended up to 2025-26 and 2026-27 for the project sanctioned during FY 2012-13 and FY 2013-14 respectively. 

Eligible entities:

The NEF scheme was open to both public and private utilities in order to promote capital investment across the distribution sector. This is a key distinguishing factor between NEF and other schemes, wherein only public utilities were eligible/participated in the schemes.

All State Power Utilities, State Power Departments and Distribution Companies in both Public & Private Sector in the States & Union Territories engaged in the business of sale of electricity to the retail consumers within the area of supply in accordance with the terms of the license for distribution and retail supply of electricity were eligible for availing interest subsidy under NEF scheme.

Eligible Projects:

All Distribution Sector Infrastructure capital projects were eligible under the Scheme. The scheme, however, excluded works covered under RGGVY & R-APDRP projects. Further, the projects where GoI had already disbursed/allocated any grant / subsidy were also not eligible under this scheme to ensure non-duplication and non-overlapping of grant/subsidy. The Steering Committee was also empowered to include any other type of project under this scheme.

The benefits of NEF were also available for capital works undertaken by the utility or franchisee on behalf of utility in the notified franchisee area provided that the provision regarding availability of NEF scheme was specifically mentioned in the bidding document for appointing franchisee. The performance criteria of the utility however were to be taken into consideration for evaluation of eligible subsidy. On meeting the performance criteria, the interest subsidy was to be released to the Utility which would then pass the benefits to the consumer through back-to-back arrangements made with franchisee regarding the same.

Eligible Loan:

The benefits of NEF could be availed by utilities for loans taken from bi-lateral / multilateral Financial Institutions for eligible project with the conditions that no concession has been provided by GoI or on behalf of GoI. The loans sanctioned by the lenders till FY 2012-13 and FY 2013-14 were eligible under the scheme provided that no disbursements were made by the lenders under these projects prior to submission of proposal to the Steering committee.

The loan amount during implementation could be enhanced only on account of cost-escalation built in the original sanction by the lenders and no enhancement was allowed for any changes in the scope of project.

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Page Last Updated At: 22/09/2023 - 06:21 PM
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