Liquidity scheme: PFC, REC have disbursed Rs 79,678 crore to discoms so far

• The government has recently approved a Rs 3.03-lakh-crore reforms-based and results-linked, revamped distribution sector scheme
• The assistance will be based on meeting pre-qualifying criteria and upon achievement of basic minimum benchmarks by discoms

New Delhi: State-run Power Finance Corporation (PFC) and REC Ltd have sanctioned loans of Rs 1,35,537 crore and disbursed Rs 79,678 crore to discoms under the liquidity infusion scheme, Power Minister RK Singh told the Rajya Sabha on Tuesday. "As on 30.06.2021, REC & PFC have sanctioned Rs 1,35,537 crore and disbursed Rs 79,678 crore respectively to States under Liquidity Infusion Scheme," said the minister. To mitigate the liquidity problems in the power sector due to low power consumption during the lockdown imposed due to COVID-19, the government had announced a liquidity infusion scheme as part of Aatmanirbhar Bharat Abhiyan on May 13, 2020.

Govt has approved Rs 3.03-lakh-crore distribution sector scheme

The government has recently approved a Rs 3.03-lakh-crore reforms-based and results-linked, revamped distribution sector scheme. The scheme seeks to improve the operational efficiencies and financial sustainability of all discoms, state power departments, excluding private sector discoms, by providing conditional financial assistance for strengthening of supply infrastructure. The assistance will be based on meeting pre-qualifying criteria and upon achievement of basic minimum benchmarks by discoms evaluated on the basis of agreed evaluation framework tied to financial improvements.

The implementation of the scheme would be based on the action plan worked out by each state. The scheme will have an outlay of Rs 3,03,758 crore, with an estimated gross budgetary support (GBS) of Rs 97,631 crore from the Central government. The revamped distribution sector scheme aims to improve operational efficiencies and financial sustainability, by providing result-linked financial assistance to discoms for strengthening of supply infrastructure based on meeting pre-qualifying criteria and achieving basic minimum benchmarks. The scheme would be available till the year 2025-26. PFC and REC Ltd have been nominated as nodal agencies for facilitating implementation of the scheme.

Background

The government has placed a lot of focus on revamping the power distribution sector in order to improve the cash flow in the sector. In order to do so, the government has introduced the liquidity infusion scheme under which long-term loans are being extended to discoms in tranches if they meet the pre-conditions required for availing the disbursement. The government is also mulling extending the lending norms, tied up with pre-conditions, to public sector banks as well. On June 17, Power Secretary Alok Kumar had said during a virtual event, "State-run PFC and REC have put in place additional conditions for discoms to avail loans from the two PSUs. And the government is now working to extend these conditions to all financial institutions, including banks. So, when discoms approach PFC, REC or any public sector bank, they will be expected to meet those additional norms. Our strategy to push discoms to implement reforms is multi-pronged."

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