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Govt to infuse Rs 90,000 cr into ailing discoms through PFC, REC

The government has decided to infuse Rs 90,000 crore, as one-time relief package, into ailing discoms through state-run PFC and REC

  • The Rs 90,000-crore relief package would be a one-time provision through PFC and REC for discoms against their receivables

  • The minister said that loans will be given against state guarantees for the exclusive purpose of discharging liabilities of discoms

New Delhi: While placing emphasis on reviving the debt-ridden power discoms (distribution companies) in the country, the government has decided to infuse Rs 90,000 crore, as one-time relief package, into ailing discoms through state-run PFC (Power Finance Corporation) and REC (Rural Electrification Corporation). The decision was announced by Finance Minister Nirmala Sitharaman on Wednesday as part of a slew of announcements pertaining to the allocation of the Rs 20-lakh-crore relief package.

“Discoms are today facing unprecedented cash flow problems and desperately need help otherwise they are unable to pay power generating companies,” said Sitharaman. In all the states, discoms are in a serious crisis, so in order to help them there is an emergency liquidity injection, which is happening to the extent of Rs 90,000 crores through PFC-REC, she added.

Reviving ailing discoms: Loans will be given against state guarantees 

The minister said that loans will be given against state guarantees for the exclusive purpose of discharging liabilities of distribution companies to gencos. Central public sector gencos will be asked to give a rebate to the discoms which would mean passing on the benefits to large industrial consumers, she said. “At a time when we are talking about self-reliant India, taking credit of being a surplus power generating country, we have reached the stage where discoms don’t have money as they are sitting with receivables,” Sitharaman said. She added that the Rs 90,000-crore relief package for discoms would be a one-time provision through PFC and REC to infuse money into discoms against their receivables.

The backdrop

Discoms dues to power generation and transmission companies currently stands at 94,000 crore. The commercial and industrial sector in India consumes around 52 percent of electricity, while domestic households consume 24 percent and agriculture sector takes up 18 percent. For the agricultural sector and domestic households, the pricing by distribution utilities is set below the actual cost in order to make electricity affordable. The gap is covered by a combination of direct subsidy transfers and cross-subsidy from higher tariffs levied on the industrial and commercial sectors.