PFC may be asked to lend afresh to stressed discoms

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Published: October 30, 2019 12:10:23 AM

State-run electricity distribution companies reported a near doubling of their financial losses in FY19 to Rs 28,369 crore in a dramatic reversal of the trend of decline in losses in FY17 and FY18 on the back of the UDAY scheme.

Sources said as part of extending ‘special funds’, PFC may give fresh loans to the Tamil Nadu Generation and Distribution Company (TANGEDCO) to help the discom pay off part of its dues. TANGEDCO’s dues to gencos stand at Rs 9,800 croreSources said as part of extending ‘special funds’, PFC may give fresh loans to the Tamil Nadu Generation and Distribution Company (TANGEDCO) to help the discom pay off part of its dues. TANGEDCO’s dues to gencos stand at Rs 9,800 crore

The Government may prod Power Finance Corporation (PFC) to extend ‘special funds’ to some of the stressed electricity distribution entities (discoms) in order to enable them to cut the dues to power producers. Sources said as part of this effort, PFC may extend fresh loans to the Tamil Nadu Generation and Distribution Company (TANGEDCO) to help the discom pay off part of its dues. TANGEDCO’s dues to gencos stand at Rs 9,800 crore.

A senior TANGEDCO official said, “We have shared the details with the government about the pending past dues. However, we are not sure of the timeline by when it will be done.” The government, according to this official, was also working on a similar plan for Telangana and Andhra Pradesh discoms as well. PFC is likely to lend between 10-11% rate of interest.

When contacted, NB Gupta, director finance of PFC, said, “As of now, we have not been formally informed about the plan. When the government will tell us, we will look into it. We are currently lending to them as per the prescribed limit under the UDAY scheme.” However, another PFC official said discoms will have to provide state guarantees before such loans are offered.

The loans are required only for past dues, as TANGEDCO has already started clearing the existing dues through letter of credits (LCs).

“We have cleared around Rs 2,000 crore of August bills, while September bills will be cleared soon,” the TANGEDCO official said.

The Tamil Nadu discom has not paid its suppliers for over 6 months. The discom has regulatory assets in excess of Rs 32,500 crore with an under recovery of Rs 0.78/kWh, as per UDAY website. However, TANGEDCO has not claimed recovery of its regulatory assets in its tariff petition since FY15 leading to significant increase in revenue gap.

Power generators have also requested for advance payment of subsidies by state governments. “The ministry of power may consider approaching APTEL as a follow up of their earlier communication with a request to ensure that other State Electricity Regulatory Commissions (SERCs) may also pass similar orders,” the Association of Power Producers wrote in a letter dated October 7 to the power secretary. It further said that the government may ask discoms to clear the remainder debt through additional LCs and staggered payment over 8 equal monthly installments.

State-run electricity distribution companies reported a near doubling of their financial losses in FY19 to Rs 28,369 crore in a dramatic reversal of the trend of decline in losses in FY17 and FY18 on the back of the UDAY scheme.

Under the government’s UDAY scheme, which was launched in November 2015, governments of 16 states had taken over around Rs 2.32 lakh crore debt of their discoms; this resulted in lowering of the interest rates on these loans to 7-8.5% from around 11-12% earlier.

Savings through improvement in billing efficiency also contributed to the loss reduction in FY17 and FY18.

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