Reserve Bank of India (RBI) always keeps a keen vigilance on External Commercial Borrowings (ECBs). Most of the companies have a common tendency to raise ECB funds to compile their projects. Huge inflows of ECB funds lead to inflation and become a threat for the domestic economy. Hence, the financial regulators are always very stringent about external borrowings. Astonishingly, the Central Government along with RBI is planning to relax the ECB norms for the Ultra Mega Power Projects (UMPPs). It is quite probable from the Government’s side to relax certain ECB norms which are very much rigid in nature, presently. The existing ECB norms bar a particular company from using the advance, surpassing US$ 20 million for meeting rupee expenditure.
With the proposed relaxation on ECBs, a company can not only accumulate low cost funds from different countries but can also utilize the sum securing cost-effective benefits.
The motive of the Government behind making the ECB flexible is to revamp the power sector. It has been estimated that the power sector needs an investment of Rs. 10 lakh crore in the forthcoming 11th plan. Companies like Reliance Power and some others are of the view that the restrictions in the sector are the most significant impediments for its rapid development.
Power sector is always among the most eminent sectors and hence its rapid development is the major concern for the Government. In achieving such objective the Government has already started taking different steps and in this process the relaxation of ECB funds has got the priority.
With the proposed relaxation on ECBs, a company can not only accumulate low cost funds from different countries but can also utilize the sum securing cost-effective benefits.
The motive of the Government behind making the ECB flexible is to revamp the power sector. It has been estimated that the power sector needs an investment of Rs. 10 lakh crore in the forthcoming 11th plan. Companies like Reliance Power and some others are of the view that the restrictions in the sector are the most significant impediments for its rapid development.
Power sector is always among the most eminent sectors and hence its rapid development is the major concern for the Government. In achieving such objective the Government has already started taking different steps and in this process the relaxation of ECB funds has got the priority.
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