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Home >Industry >Energy >Discom dues to hit all-time high of 4.5 tn: Crisil

The debt burden of state-owned electricity distribution companies (discoms) is expected to hit an all-time high of 4.5 trillion this fiscal year, according to a Crisil Ratings report. This could further impact the alarmingly weak financials of discoms, with states struggling to pay for electricity bought because of lower realizations.

“The Centre’s recent 90,000 crore liquidity line will help state discoms settle a significant portion of their overdue bills to generating companies. However, with power demand weak and cash losses high amid the covid-19 pandemic, discoms would end up owing lenders a staggering 4.5 trillion by the end of this fiscal, or 30% more than last fiscal," it added.

Discoms are the weakest link in the electricity value chain with poor payment records not only adversely affecting power generation firms, but also contributing to the stress in the banking sector.

The Centre announced a 90,000 crore loan for discoms against their receivables, as part of the 20 trillion stimulus.However, it hasn’t found many takers as some states are averse to providing guarantees against the loans and to implement the mandatory reform measures.

“Today, only one in five discoms is capable of servicing debt through own cash flows and budgeted subsidies. The scenario would worsen this fiscal because of weak demand for power, which comes on the back of an already low base, rising costs, and losses caused by the pandemic-led lockdown," Crisil said.

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