Under a new arrangement, state owned financial institutions like rural electrification corporation (REC), power finance corporation (PFC) and the state bank of India (SBI) will be disbursing loan sanctioned for projects directly to BHEL. 

According to a news report in The Financial Express, if lenders give funds to BHEL rather than the power firms, it would help them to realise the loans as it would pave the way for a timely completion of projects and earnings from the sale of electricity could be used to repay loans.

The new payment mechanism comes in the backdrop of concerns about non payment by customers. The total dues outstanding of BHEL as of June stand at around Rs 39,000 crore. Of this, only Rs13, 000 crore is due and recoverable as on date and the balance would become dues once the PSU complies with some supply related milestone.

According to sources in the heavy industries ministry, BHEL has spoken to chairmen of PFC, REC and SBI, and the latter has agreed for such mechanism on a case to case basis.

“We are now planning to institutionalise this mechanism for large suppliers to power projects such as BHEL so that work on power plants is not hampered due to non payment of dues by the developers,” a BHEL official was quoted saying.

Representatives of SBI, PFC and REC and a few other financial institutions along with officials of the reserve bank of India (RBI) are expected to soon make the direct transfer mechanism a permanent feature of supplier vendor contracts in power projects.

A heavy ministry official involved in the talks on the issue said that a line entry could be made at the time of financial closure of a project that such transfers would be made in cases where vendors have large exposure in projects.