HYDERABAD: Stung by the refusal to release balance loan amounts to fund irrigation projects, the State government is considering initiating legal action against two financial institutions — Power Finance Corporation Ltd (PFC) and Rural Electrification Corporation Ltd (REC). The government considers the loan turndown to be in violation of the tripartite agreement it had signed with them. After the Union Finance Ministry refused to give permission to the State government to raise open market borrowings, it is now the turn of PFC and REC to back out on releasing the loan amounts.
The State government had signed a tripartite agreement with these financial institutions for the construction of several irrigation projects in the past. Though PFC and REC released around 90 per cent loan amounts as per the agreement, they decided not to release the balance amounts until the State government obtains clearance from the Reserve Bank of India (RBI).
According to government sources, the PFC and REC stopped releasing the loan amounts in April this year. The State government proposed to raise Rs 37,737 crore from the PFC of which it released Rs 33,079 crore so far. Likewise, as against the agreed loan amount of Rs 30,536 crore, the REC has so far released only Rs 12,742 crore. The Telangana Water Resources Development Corporation (TWRDC) also entered into an agreement to raise a loan of Rs 13,516 crore. But it has received only Rs 12,239 crore till March, 2022.