Why most discoms are yet to get state govt nod for PFC-REC loans

By: |
June 30, 2020 5:20 AM

Maharashtra discoms have already been sanctioned Rs 2,500 crore as the first tranche of loans which are designed to be disbursed in two equal halves.

Funding to discoms under the Atmanirbhar Bharat package would be done in two tranches of Rs 45,000 crore each, both special long-term transition loans of tenures up to 10 years.Funding to discoms under the Atmanirbhar Bharat package would be done in two tranches of Rs 45,000 crore each, both special long-term transition loans of tenures up to 10 years.

Most of the state-run power distribution companies (discoms) that have evinced interest in the PFC-REC loan facility are yet to receive the final approval from the respective state governments to file requests for loans.

As on June 24, the Centre had received from discoms preliminary letters of interest for an aggregate amount of Rs 91,699-crore loans, but final applications, supported by state governments, were for only Rs 18,491 crore, and these belonged to just six states, according to official sources.

Any delay in the process of sanction and release of the special Rs 90,000-crore loans could undermine the discoms’ ability to clear dues to power generators – dues rose 72% year-on-year to Rs 1.06 lakh crore at April-end. Over-dues or dues of more than 60 days to central government-owned thermal power plants were Rs 36,318 crore while discoms’s dues to private players and renewable units were Rs 40,101 crore and Rs 8,410 crore, respectively, at the end of April.

The Centre had announced the liquidity infusion scheme under the Atmanirbhar Bharat package. According to documents reviewed by FE, PFC and REC, which will disburse the loans, have received formal application from discoms of Andhra Pradesh (Rs 6,600 crore), Rajasthan (Rs 4,064 crore), Punjab (Rs 4,000 crore), Maharashtra (Rs 5,000 crore), Uttarakhand (Rs 807 crore) and Manipur (Rs 124 crore).

Maharashtra discoms have already been sanctioned Rs 2,500 crore as the first tranche of loans which are designed to be disbursed in two equal halves.

Since this loan is to be backed by state government guarantee, it is anticipated that many states might not come forward, as some will need relaxation of FRBM norms to avail the funds.

Discoms of Uttar Pradesh (Rs 21,500 crore), Telangana (Rs 12,000 crore), Karnataka (Rs 7,616 crore) and Jharkhand Rs 5,039 crore) have indicated their intent to borrow large amounts under the scheme, but they have not yet received approvals of respective state governments.

Stressed discoms cannot raise funds at cheaper rates, even though the interest rate on the special PFC-REC loan will be 150 bps higher than the rate at which they borrow. Discoms will have to commit to loss-reduction trajectory to qualify for the loan.

Funding to discoms under the Atmanirbhar Bharat package would be done in two tranches of Rs 45,000 crore each, both special long-term transition loans of tenures up to 10 years.

The release of the first component of the loan to each state discom will be contingent on the respective state government undertaking to clear departmental dues to its discom, and putting in place a credible mechanism to release subsidies, meant for the consumers but routed through discoms, in advance.

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

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