‘Reassess your budget, fiscal responsibility to take special loan for discoms’, says FM Sitharaman to states

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Updated: Jun 27, 2020 11:22 AM

The special low-cost loan facility is primarily to be used to clear discoms’ over Rs 94,000-cr dues to the state-owned power producers.

Addressing a rally in Andhra Pradesh via video conference, the minister said power discoms are reeling under low demand conditions.

The state governments will need to recalibrate their Fiscal Responsibility and Budget Management (FRBM) Acts to be eligible for the special Rs 90,000-crore loan window being made available to them to enable their discoms to clear dues to generators, finance minister Nirmala Sitharaman said. These loans are guaranteed by the states.

Addressing a rally in Andhra Pradesh via video conference, the minister said power discoms are reeling under low demand conditions which impacted their revenues and ability to service payment dues to generators.

While the Centre is giving power at Rs 2.70 per unit, the state (Andhra) is charging Rs 9 per unit, which is bound to affect the industrial and MSME sectors, the minister said.

The power sector in Andhra Pradesh is in a crisis with discoms’ payables being Rs 33,209 crore as on March 31, 2020. Of this, outstanding working capital loans are Rs 17,087 crore while Rs 16,122 crore is power purchase dues. The subsidy and government department dues receivables by discoms stand at Rs 13,244 crore. Even after deducting the dues receivable from the state government, discoms’ losses stand at Rs 19,965 crore.

According to officials, discoms have to pay Rs 7,500 crore per annum to generating stations and Rs 1,450 crore to Power Grid Corporation of India towards fixed cost every year. Discoms receive Rs 6,500 crore by way of minimum demand charges (fixed costs) annually from consumers.

The special low-cost loan facility from PFC-REC is primarily to be used to clear discoms’ over Rs 94,000-cr dues to the state-owned power producers. Interest rate on PFC-REC loans will be 150 bps higher than the rate at which lenders borrow, but this facility is still cheaper for stressed discoms.

Union power minister RK Singh recently said requests by states have already crossed the approved threshold of Rs 90,000 crore. “As many as 15 states have sought Rs 91,699 crore. More states are joining”, he said.

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