PFC-REC to clear genco dues directly from discom loans

By: |
Published: May 21, 2020 2:30:24 AM

If the states avail the full quantum of the loan, much of the outstanding receivables of the gencos, which stood at Rs 93,066 crore at the end of March 2020, would be cleared.

The loans will come with definite riders meant to ensure that the facility indeed comes to the aid of these tottering entities.The loans will come with definite riders meant to ensure that the facility indeed comes to the aid of these tottering entities.

Power sector lenders PFC and REC will use the Rs 90,000-crore loan amount allotted to state-run power distribution companies (discoms) to directly pay power generators (gencos) which owe money from these entities.

“The payment shall be released directly to CPSU gencos /RE rencos/IPPs/ CPSU transcos based on authorisation of discoms in this regard,” policy notes separately released by the lenders explaining the disbursal mechanism of the ‘special long-term transition loan to discoms for COVID 19’ said.

The Rs 90,000-crore loan was announced by finance minister Nirmala Sitharaman last week to inject liquidity into the electricity sector as a part of the Atmanirbhar Bharat package. Discoms will be eligible for these loans only to the extent of the amount receivable to them from their respective state governments in the form of unpaid subsidies and dues (pending bills of civic bodies and other such institutions), restricted to outstanding dues of gencos and Power Grid Corporation of India. Such government department dues to discoms currently stand at about Rs 54,000 crore across the country.

If the states avail the full quantum of the loan, much of the outstanding receivables of the gencos, which stood at Rs 93,066 crore at the end of March 2020, would be cleared. About 88% of these receivables were “overdues” with payment default of 60 days or more. The loans will come with definite riders meant to ensure that the facility indeed comes to the aid of these tottering entities.

The fresh funding would be done in two tranches of Rs 45,000 crore each, and the release of the first component to each state discom will be contingent on the respective state government undertaking to clear departmental dues to its discom in three years, and putting in place a credible mechanism to release the subsidies – meant for consumers but routed through the discoms – in advance.

To receive the second tranche of the package, discoms will have to furnish evidence of actions taken to implement the initial undertakings, which will include enabling digital payment of electricity bills. At the stage of release of the second tranche of Rs 45,000 crore, discoms will also have to come up with a plan, endorsed by the respective state governments, to reduce their losses.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Building rural economy key to halt mirgration: Nobel laureate Muhammad Yunus
2Atmanirbhar Bharat not about import substitution; here’s what the Modi’s self-reliant India means
3Ordinances on inter-state farm trade, contract farming out of judicial process