In the wake up difficulties being faced by the energy sector, state run Power Finance Corp has set up a project monitoring cell to keep an eye on the stressed loan portfolio.

A top official said that "Though the idea of monitoring cell was conceived in 2009, we have recently set up a separate cell for this to better check the progress of the projects to which we have lent money.”

Monitoring of the projects would be in a broader sense to see the debt servicing capacity of borrowers, the official said that "We will do monitoring in financial terms, which will be different from a typical project monitoring unit that emphasizes on execution. We will keep an eye on the critical milestones set by the company and see whether they are met or not."

Currently, financial institutions are worried about the advances extended to electricity boards of Tamil Nadu, UP, Rajasthan, Bihar, Haryana, Madhya Pradesh and Punjab, which according to rating agency Crisil, are the most vulnerable.

As per Crisil, losses of discoms rose 24% to INR 27,500 crore between 2006-07 and 2009-10, which could have risen to INR 35,000 to INR 40,000 crore last fiscal, mainly because of problems in utilities, which are not free to revise the already low tariffs. Also, many green-field projects are stuck due to land issues and coal linkage problems.

The official said that "Many of the green-field projects are stuck due to coal linkage and land acquisition related issues. Though we don't have any control over these issues, we will try to minimize the risk by diversifying our portfolio.”

(Sourced from ET)