PFC-REC may lend afresh to stressed discoms

By: |
April 9, 2020 9:14 AM

Amid the ongoing lockdown across the country, the Centre has provided a breather to state discoms to tide over the current liquidity situation.

“Efforts are also being made to infuse some liquidity in the power sector, the details of which would be shared with discoms shortly,” the ministry said.The state discoms can now source loans from PFC-REC to maintain their basic operations and address the power purchase costs.

Amid the ongoing lockdown across the country, the Centre has provided a breather to state discoms to tide over the current liquidity situation. The state discoms can now source loans from PFC-REC to maintain their basic operations and address the power purchase costs.

In a meeting held on Wednesday between the Union power secretary and the state principal secretaries, the latter were asked to source loans from REC and PFC which would also carry a moratorium on payment to overcome their immediate liquidity concerns.

According to government sources, the modalities of infusing liquidity into discoms are currently being worked out. A senior official aware of the developments told FE that discoms have sought reliefs on multiple fronts, including relaxation of FRBM norms. Other demands include easing of NPA classification and discount on fixed charges payable to generators when power is not being procured from plants. They also want suspension of the condition in the UDAY scheme, which allows discoms to borrow only up to 25% of their previous year’s revenue as working capital from banks and financial institutions.

Aseemkumar Gupta, principal secretary, energy, in the Maharashtra government and MSEDCL managing director told FE: “The meeting was a very positive indication of the support the central government is willing to lend to the discoms. It gives us a lot of respite. Now, we have to make the proposals to REC and PFC.”

State discoms will now make the proposal to REC and PFC depending on their requirements in the next few days and the lending is expected to start early next week. REC and PFC are likely to borrow from market 5-year, 10- year papers to lend around `20,000-30,000 crore towards discoms’ requirements.

A senior PFC official said there will be different repayment options that will be available to the borrowers, such as 1-year moratorium or 2-5 year option, with two-year moratorium and five-year repayment period.

The discoms have around `87,000-crore dues pending towards generation companies. The current lockdown has impacted their working capital requirements with discoms finding it difficult to continue meter-reading exercises and collect payments from consumers. Power demand has also dropped more than 26% since March 24, the day the government announced the lockdown.

Shubhranshu Patnaik, partner, energy, at Deloitte India, said, industrial and commercial consumers account for over half the consumption in most states and are subsidising consumer segments. When this demand goes down sharply, it is a double whammy for the discoms. The distribution companies’ costs are mostly fixed (around 60-70%) with only the variable cost of generation being use-based. This is a big mismatch and likely to create major stress in working capital availability for discoms.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

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

Next Stories
1Exporters facing shortage of shipping containers: EEPC
2Jio Platforms receives Rs 2,624 cr from Intel Capital, Qualcomm Ventures
3Vedanta faces do or die battle if delisting fails