Discoms will benefit only if loan rates are reduced

Sources in the energy department said the state Discoms borrowed loans at a much lower rate than those offered by the PFC and REC.
For representational purposes
For representational purposes

VIJAYAWADA: The one-time liquidity infusion of Rs 90,000 crore announced by the Union government to help power distribution companies (Discoms), whose revenue was severely hit by the lockdown, may not be helpful unless the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) offer loans at lower interest rates. 

Sources in the energy department said the state Discoms borrowed loans at a much lower rate than those offered by the PFC and REC.

Union Finance Minister Nirmala Sitharaman on Wednesday, announced a slew of initiatives under ‘Aatmanirbhar Bharat Abhiyaan’, including pumping in Rs 90,000 crore through loans against state guarantee as Discoms’ revenues plummeted and the unprecedented cash flow problem was accentuated by reduced demand. 

According to the minister, Discoms’ payables to power generation and transmission companies are Rs 94,000 crore. So, effectively, the Centre says the new initiative would help clear 95 per cent of the payables.

However, sources in the AP government said PFC and REC charge 11 per cent interest even with state government guarantee, while banks have offered loans at as low as 7.95/8 per cent against government guarantee. 

PFC, REC may give  loans at 8-8.5 per cent  

So, unless PFC and REC offer loans at lower rates, it would not benefit the debt-ridden and cash-strapped Discoms.

Reports suggest PFC and REC may disburse the loans at a rate of 8-8.5%. In AP, power utilities saw revenue fall by 40 per cent in March and April.

According to a statement released by the department on May 3, Discoms pegged the estimated loss at Rs 2,500 crore in the first quarter of FY 2020-21 as a power demand reduction of 3,200 MW is projected in the same period.

Even prior to the lockdown, state Discoms power purchase dues, to be paid to generators, of `16,057 crore as on Feb 15, 2020.

Discoms, with help from the state, have been gradually clearing arrears, but have a long way to go. On the bright side, the Union Power Ministry’s decision — to waive fixed charges and interstate transmission charges (by power grid) against power not drawn from NTPC, Damodar Valley Corporation and other Central Public Sector Enterprises for the Mar 24-May 17 period— is expected to help Discoms, which are burdened by paying minimum charges despite not using power.

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