Declining credit flow has forced energy sector companies in coal, petroleum and nuclear fuel to delay their expansion plans, not a nes Assocham study.

Acording to the study, Trends of Industrial Deployment of Gross Bank Credit petroleum, coal and nuclear fuels companies have been hit substantially, as credit disbursements to the sector dropped to nearly half from Rs10,736 crore in 2006-07 to Rs5,852 crore in 2007-08.

"With the companies incurring losses with continuous rise in the fuel prices, the companies in the petroleum, coal and nuclear fuels sector have deferred their expansion plans," the study reveals

Even those power sector companies that had slipped on their power generation targets during 10th Five-year Plan, have been hit hard by the rising cost of funds. Assocham estimates, the power shortage is likely to hit the economic growth by over one per cent annually.

The latest credit figures released by Reserve Bank reval that growth in bank credit has declined from 27.9 per cent in 2006-07 to 21.6 per cent in 2007-08.

RBI's monetary measures have impacted key sectors like mining, construction, petroleum, gems & jewellery, textiles in credit disbursements.

Credit allocation to the mining and quarrying sector (including coal) fell from Rs 3,558 crore to Rs 2,912 crore.

In growth terms, the sector witnessed a fall of credit disbursements from 85.8 per cent in 2006-07 to 37.8 per cent in the previous fiscal. The fall in the gross bank credit has severely impacted the industrial activity.

With the hikes in the policy rates, the banks are left with no option but to hike the lending rates which has led to slower bank credit and slower growth, Assocham President Sajjan Jindal said.

Defending the Reserve Bank's tight credit policy, its new Governor D Subbarao has said the apex bank would push financial sector reforms to accelerate high growth, but watch the scenario before unveiling any further monetary measures.

"Not tightening the monetary policy...would have eroded confidence in the economy...we will be monitoring the situation continuously and closely and take appropriate action," he said in his maiden press conference as RBI Governor in Mumbai on Tuesday.

(See: Slower credit growth impacts industrial activity in FY 2007-08 : Assocham)