Power discoms to get ₹90,000 cr liquidity fund as demand drops
THE ₹90,000 CRORE INFUSION, WHICH IS LINKED TO REFORMS, WILL HELP IN CLEARING OUTSTANDING DUES OF DISCOMS TO STATE-OWNED FINANCIAL INSTITUTIONS
The government on Thursday announced a ₹90,000 crore liquidity injection into fund-starved electricity distribution companies (discoms) as part of a stimulus package to revive the country’s battered economy. The announcement, made by finance minister Nirmala Sitharaman, is one of the measures in the first tranche of a stimulus package to combat the economic disruption that has worsened the precarious finances of discoms.
“Discoms today are facing unprecedented cash-flow problems,” Sitharaman said.
Electricity demand load shifted to homes during the lockdown, resulting in lower realizations. With peak electricity demand coming down, commercial and industrial power demand has taken a hit after many factories shut.
The ₹90,000 crore infusion, which is linked to reforms, will help in clearing outstanding dues of discoms to state-owned financial institutions. Mint reported the proposed power sector package on Wednesday.
The state-owned Power Finance Corp. (PFC) and Rural Electrification Corp. (REC) will infuse the liquidity by raising ₹90,000 crore from the markets against the receivables of distransmission coms. These funds will be then given to discoms against state government guarantees for the sole purpose of discharging their liabilities.
The government has also asked the central public sector generation companies to give rebate to discoms that will be passed on to the end users.
“…we are making it clear that these benefits should pass to the end consumers,” Sitharaman said.
State-owned PFC and REC have $80 billion by assets and are the largest lenders to the sector. The idea is to clear the payment backlog with concessional loans guaranteed by the respective state governments.
The one-time liquidity infusion will be used to pay the public sector generation firms, transmission companies, independent power producers and renewable energy generators. The dues of discoms to power generation and firms are to the tune of ₹94,000 crore. These loans will be disbursed in two tranches and be linked to certain reforms such as increasing digital payment interfaces; prepaid metering in government departments; and coming up with a concrete plan to reduce losses.
This comes amid India’s proposed distribution reforms scheme—tentatively named Atal Distribution System Improvement Yojana (Aditya)—to cut electricity losses below 12%. The scheme aims to ensure continuous supply of power, adopting models such as privatizing staterun discoms and promoting retail competition.
Sitharaman also spoke about the JAM trinity solution—jan Dhan Yojana, Aadhaar and mobile numbers—as a gamechanging reform for better targeting of subsidies.
The National Democratic Alliance government has readied a raft of power sector reforms, including implementing the direct benefit transfer scheme in the electricity sector for better targeting of subsidies. According to the draft Electricity Act (Amendment) Bill 2020 to the Electricity Act, 2003, the government has also pitched for a cost reflective tariff and setting up an Electricity Contract Enforcement Authority to enforce power purchase agreements.
opposition parties expressed disappointment with the special Covid-19 stimulus package announced by the Centre on Wednesday with the Congress claiming that it has nothing for the migrant workers walking back to their home states.
The Congress fielded former finance minister, P Chidambaram, to counter the government’s announcements.
“There is nothing in what the finance minister said for the lakhs of poor, hungry and devastated migrant workers who have walked — and many thousands are still walking — back to their home states. This is a cruel blow dealt to those who toil every day,” he said, addressing a news conference through video.
“There is also nothing by way of cash transfer to the bottom half of the population (13 crore families) who have been pushed into destitution. Only yesterday, Prof Thomas Pikketty [the French economist] pleaded for cash transfers to the poor,” added Chidambaram.
“Except for the modest MSME package, we are disappointed with today’s announcements,” he said.
West Bengal chief minister and TMC supremo Mamata
Banerjee said, “The special economic package announced by the union government is nothing but a big zero. It is eyewash to fool the people. There is nothing for the unorganised sector, public spending and employment generation,” she told reporters.
“Yesterday, when the Prime Minister announced ~20 lakh crore package, we were hopeful that the interest of the states will be looked into. But today, after the union finance minister made the announcements, it was found that everything that was said was a bluff,” she said.
Samajwadi Party chief Akhilesh Yadav called the package mere rhetoric.
“First it was the false promise of (~) 15 lakh, and now it is the claim of (~) 20 lakh crore...now, the 133 crore people will be hit by a 133-time bigger ‘jumla’ (rhetoric)...how can anyone believe this...,” he tweeted in Hindi. Congress leader Manish Tewari also criticised the government’s move. “It is a clear case of skewed priorities of the government. Today, India faces the single biggest humanitarian crisis after the Partition in 1947 and the displacement of people from East Pakistan. There are millions of migrant labourers left without jobs and shelter above their heads. But for the government it seems they don’t exist,” he said.