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Govt asks PSUs to defer fixed charges, offer 20-25% rebate on power supplied to discoms

While extending a Rs 90,000-crore package to stressed discoms, the govt has asked PSUs to defer fixed charges and offer a 20-25% rebate to discoms

  • Under this intervention, REC and PFC would extend special long-term transition loans up to 10 years to discoms

  • It will help restart the virtuous cycle of cash flow in the power sector, said the statement

New Delhi: Formalising an announcement which was made just a few days ago, the government has extended a Rs 90,000-crore relief package to stressed discoms on Saturday. It has also asked state-run power PSUs to defer some fixed charges and has suggested that they offer a 20-25 percent rebate to discoms on power supplied and on inter-state transmission charges during the lockdown. In an interview with The Economic Times, Power Minister RK Singh had earlier pegged the foregone amount by all power PSUs at Rs 3000 crore.

“Union Ministry of Power has written to all states/UTs, extending Rs 90,000 crore financial package to assist the stressed DISCOMs. A communication in this regard has been sent on 14.05.2020,” said an official release from the Ministry of Power.

Package expected to ease the burden on discoms: RK Singh

“The package for the power sector will significantly reduce the burden on discoms for maintaining the distribution of electricity as supplied by gencos/transcos during these difficult times,” said Singh. The government had on May 13 decided to make an infusion of liquidity of Rs 90,000 crore through PFC (Power Finance Corporation) and REC (Rural Electrification Corporation) as a part of the Atmanirbhar Bharat Abhiyan.

Under this intervention, REC and PFC would extend special long-term transition loans up to 10 years to discoms.

The loan from PSUs to stressed discoms comes with riders

The letter sent to states/UTs mentions that REC and PFC shall immediately extend loans to discoms that have headroom for further borrowing within the working capital limits prescribed under UDAY. Further, the DISCOMs that do not have headroom under UDAY working capital limits but have receivables from the state government in the form of electricity dues and subsidy not disbursed will also be eligible for these loans to the extent of receivables from the state government. Since these loans are long-term and are not against the working capital requirement of discoms and come with repayment security from the state government, UDAY working capital limits will not be applicable, the official statement said. In addition, the respective states may request relaxation of the limit to the Central government for DISCOMs that do not have receivables from states or headroom available under the working capital limits imposed under UDAY.

Rs 90,000-cr package will restart cash flow in power sector: Govt

The letter said that the COVID-19 pandemic and the resultant lockdown has adversely affected the power sector finances, creating a situation of acute liquidity crisis across the value chain in the power sector as a consequence. In this situation, the liquidity infusion in the power sector value chain will help to tide over the cash flow problem. This money will help discoms to repay most of the money that they owe to power generators (Gencos) and Transmission Companies (Transcos). It will help restart the virtuous cycle of cash flow in the power sector, said the statement.

The loans will be provided to discoms against guarantees by the state governments which will be used to clear liabilities of CPSE gencos/transco, IPP and RE generators. Total funding quantum will be about Rs 90,000 crore. The funding would be done in two tranches of Rs 45,000 crore each, it added.

Govt asks PSUs to defer fixed charge, forego 20-25% on power supplied, ISTS

“To further lift the discoms out of financial stress, the Power Ministry, as per another communication issued on 15.5.2020, has decided to defer the fixed charge on power not scheduled of Central Gencos for the lockdown period and it will be repaid in interest-free three equal installments in subsequent months,” the statement said. During the lockdown period, there has been a significant drop in demand because industrial and commercial units, which consume the bulk of India’s overall electricity consumption, were closed. According to the Power Purchase Agreements, discoms pay a fixed charge to gencos for all the contracted quantity, even if power is not drawn. “This has burdened the discoms because they have to pay for the power that was not used during the lockdown period,” said the statement.

The government has also suggested PSUs to offer a rebate of 20-25 percent on power supplied (fixed cost), including Inter-State Transmission Charges (ISTS) payable to PGCIL (PowerGrid Corporation of India Ltd), for the lockdown period. The discoms have been asked to pass on these cost savings to the end consumers which will lead to a reduction in electricity cost, said the release.