The benefits being part of the Aatmnirbhar package announced by the Finance Ministry in May to infuse liquidity in the financially ailing power distribution sector.
New Delhi, August 19: In order to assist the state-owned power generation and transmission companies (DISCOMs) to clear their dues, the Cabinet Committee on Economic Affairs (CCEA) on Wednesday relaxed the lending limits. Under the limits stipulated in the UDAY scheme for turnaround of the DISCOMs, they could earlier borrow only up to 25% of their last year’s working capital. To discipline the DISCOMs’ finances, any lending was tied with its performance.
The CCEA has now relaxed this limit for one-time lending to help DISCOMs that have exhausted their borrowing limits.
“The liquidity of the power sector is not expected to improve in the short term, as economic activity and power demand will take some time to pick up. There is, thus, an immediate need to infuse liquidity in the power sector for continuation of power supply”, said a government statement.
As part of the Aatmnirbhar package, the loan was announced by the finance ministry in May to infuse liquidity in the financially ailing power distribution sector, aiming to provide a one-time loan by Power Finance Corporation and Rural Electrification Corporation to DISCOMs for clearing their dues to generating and transmission companies. The total dues of the DISCOMs to GENCOs, as of June 2020, amounted to ₹1.13 trillion.
Of the ₹90,000 crore sized loan proposed, close to ₹68,000 crore has been sanctioned, a senior official said. Some states who asked for the loan, however, had been breaching the UDAY limit of 25% of working capital. According to government sources, DISCOMs of Tamil Nadu and Bihar, having sought loans of ₹15,000 crore and ₹3,524 crore respectively above their UDAY limit, would benefit from the relaxation.
The state government would need to clear the dues of government departments to the DISCOMs before availing loan along with giving a state guarantee to the lenders. The DISCOMs would also need to indicate a trajectory of loss reduction – both financial and operational.
The National aggregate Technical and Commercial loss (AT&C) or (power supply loss due to inefficient system) of DISCOMs accounted for 20.8% while its financial loss was ₹18,316 crore as on December 2019. The national average AT&C loss under the DISCOMs reforms scheme UDAY was supposed to come down to 15% by March 2019.
