SC Orders 4-Year Amortisation of ₹1.7 Lakh Cr Regulatory Assets – Impact on REC & PFC

The Supreme Court has ordered all regulatory assets (RAs)—₹1.7 lakh crore in total across states like Tamil Nadu, Rajasthan, and Delhi—to be amortised within four years, with new RAs cleared in three years. RAs arise from discoms’ revenue shortfalls due to artificially low tariffs, forcing them to borrow, hurting their balance sheets. Impact on REC & PFC Short-term risk: Faster amortisation may strain discom cash flows, delaying loan repayments and pressuring asset quality. Long-term gain: Cost-reflective tariffs will improve discom viability, enhancing loan servicing and strengthening the financial health of lenders REC and PFC. Reform push: The ruling enforces fiscal discipline, reducing reliance on deferred cost recovery—a positive shift for power sector lending. While near-term stress is possible, the decision paves the way for a cleaner, more sustainable power financing ecosystem.