Sending a stern message to state-run power distribution entities (discoms) that refuse to mend their ways and be on a commercially viable path despite several bailout packages, the Union power ministry has told sector-specific lenders PFC-REC that they need not extend any new credit line to the discoms, after the exhaustion of the Rs 90,000-crore liquidity window, if the latter don’t self-correct.
“PFC-REC lending norms have been tightened and the prudential norms have been updated to correspond to the best followed by any financial institution,” Union power minister RK Singh told FE.
“Any further loan request, apart from the Rs 90,000 crore earmarked for the liquidity infusion scheme will be evaluated according to the revised prudential norms,” Singh added.
Clearly, the revised norms will make loss-making, non-compliant ineligible for fresh credit.
PFC-REC have been the principal source of loans for the discoms, as other institutions, including public sector scheduled commercial banks, are virtually out of bounds to them, given the prudential standards they follow.
Financial losses of discoms surged 83% annually to Rs 61,360 crore in FY19, an analysis by PFC showed. Losses of five states — Andhra Pradesh, Tamil Nadu, Madhya Pradesh, Telangana and Uttar Pradesh — comprised 88% of the total discom losses in the country. The losses are attributed to delayed subsidy disbursal by the state governments, inefficient billing and tariff collection and inadequate tariff hikes.
“Under the revised norms, discoms will be able to get fresh loans from PFC-REC, provided they chart a trajectory for loss reduction which is approved by their respective state governments and also the Union power ministry,” Singh said. If the discoms fail to traverse the glide path for aggregate technical and commercial (AT&C) loss reduction, as sanctioned by the Centre and states, the loans will be recalled.
Owing to deteriorating finances, the discoms are not able to pay power generators on time, causing dues to mount. Overdues — dues owed by discoms to generators more than 60 days — stood at a whopping Rs 1.2 lakh crore across the country at the end of July, as per the government’s Praapti portal. To clear such dues, the Centre had announced the liquidity infusion scheme under the Aatmanirbhar Bharat package.
PFC and REC have received loan applications for an aggregate amount of Rs 1.6 lakh crore under the liquidity scheme so far. Out of this, `68,000 crore has been sanctioned, of which Rs 24,000 crore has been disbursed.
The Cabinet has recently allowed a one-time relaxation to the eligibility criteria for discoms to avail working capital loans under the scheme by allowing PFC-REC to lend discoms even beyond the cap of 25% of previous year’s revenue imposed under the Ujwal Discom Assurance Yojana (Uday) scheme.
