Three non-BJP states are the first to apply for loans under the Special Liquidity Infusion Scheme floated by the Center for the Revival of Financially Depressed Power Distribution Companies (Discoms). Andhra Pradesh, Rajasthan and Punjab have cumulatively requested Rs 14,664 crore from state-owned lenders Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).
Last month, the Finance Minister announced a special loan scheme for discomfort in its 15-point agenda to boost the economy. The amount of the loan scheme is expected to be Rs 90,000 crore. The loan is strictly for the clearing of discomfort charges for power-generating companies with a record Rs 1.08 trillion, as was the case in April 2020.
Senior government sources said that the loan application for these states is now "under process" and will soon be approved. The respective state governments would have to provide guarantees against the loans granted to the discoms. PFC and REC shall disburse loans in equal proportions.
“The amount which will be disbursed to the discoms would be lesser than requested and in tranches,” said a senior PFC executive. The rate of interest for this loan is expected to be in the range of 9-9.5 per cent. The executive requesting anonymity said they have borrowed recently at a rate above 7 per cent. “With the 150 bps spread allowed under this loan scheme, we would lend to the states in the range above 9 per cent,” said another executive.
To borrow more for this scheme, officials said that PFC and REC will issue bonds on the basis of initial demand from the states. PFC and REC executives expect this amount to be around Rs 20,000 crore.
"The power ministry is in touch with several domestic landers like LIC, EPFO and private and government banks which had earlier subscribed to the discoms bonds. The government expects them to participate this time as well," said an official.
Apart from the three states, Uttar Pradesh and Karnataka have also shown interest in taking the loan under this scheme, although an official request has yet to be made. "Uttar Pradesh, Karnataka, Telangana, Jharkhand and Jammu & Kashmir are some of the states that have indicated their interest in borrowing under this scheme. They also indicated the amount of their loan request. Application from their side is expected by the end of the month, "the official said.
Once approved, the total amount of the loan sanctioned shall be Rs 67,368 crore.
Maharashtra, Uttarakhand, Bihar and Tamil Nadu requested a working capital loan totalling Rs 24,331 crore. Loan for Maharashtra Rs 2,500 crore has been sanctioned, said the official.
Union Minister of State for Power, New and Renewable Energy R K Singh said on Thursday the total request for a loan from States stands at Rs 93,138 crore. The sanctioned amount in the first tranche is likely to be close to Rs 20,000 crore.
To make use of the loan, the state government would need to clear the discomfort fees of the government departments and also provide the lenders with a state guarantee. Discoms would also need to indicate the loss reduction path – both financial and operational.
The national aggregate technical and commercial loss (AT&C) or (power supply loss due to inefficient system) of discomfort was 20.8% and the financial loss was Rs 18.316 crore as of December 2019. Under the last discomfort reform scheme UDAY, the national average AT&C loss was expected to fall to 15% by March 2019.
