Power discoms get ₹90,000 crore liquidity lifeline

The government on Wednesday 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 already 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 down.

The ₹90,000 crore reform-linked injection will help in clearing outstanding dues of discoms.

“…we are making it clear that these benefits should pass to the end consumers,” she said.

Mint reported about the proposed power sector package on Wednesday.

“The government has also decided to waive off the fixed charges and interstate transmission charges (by Power Grid Corp. of India) against the power not drawn from NTPC, DVC and other CPSE from the period from 24 March 2020 to 17-05-2020,” power minister Raj Kumar Singh said in a post on Twitter.

The waiving of ₹0.22 per unit inter-state electricity transmission charges by state-owned Power Grid Corp. of India Ltd may result in a savings of around ₹1,400 crore for discoms.

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 discoms.

These funds will be then given to discoms against state government guarantees for the sole purpose of discharging their liabilities.

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.

This 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 transmission firms are to the tune of ₹94,000 crore. These loans would be disbursed in two tranches and will be linked to certain reforms such as increasing digital payment interfaces; prepaid metering in government departments and making action plans for loss reduction among others.

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 state-run discoms and promoting retail competition.

Sitharaman also spoke about the JAM trinity solution—Jan Dhan Yojana, Aadhaar and mobile numbers—as a game-changing reform for better targeting of subsidies.