Funding to be plugged for non reforming discoms: Power Minister

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SME Times News Bureau | 29 Aug, 2020
The Covid-19 pandemic may have pushed the government to provide liquidity support to inefficient and loss making discoms but days of easy financing for such entities will soon be over as the Power Ministry has directed state-run power sector funding institutions to enforce prudential norms and make proper due diligence before disbursing loans.

In an exclusive interview to IANS, Minister of State for Power and Renewable Energy R.K. Singh said that in line with banks, sector specific lenders Power Finance Corporation and REC would plug the financing window on discoms that are making losses year after year and fail to take steps to improve their financial position.

"We have made an exception over financing loss making discoms in the case of special Rs 90,000 crore liquidity window opened under Aatmanirbhar Bharat package. Other than this, no discoms will be able to get financing from PFC and REC now because their prudential now have been updated and strengthened and brought at par with banks," Singh said highlighting the contours of the new carrot and stick policy of the government aimed at reforming the sector.

"The adherence to prudential norms would not mean that the door for financing closes completely for loss making discoms. They can still get funds provided they provide trajectory for loss reduction and get its approved by the state and the central government and then file their loan application with PFC and REC," the minister said.

Despite efforts to improve the states of country's distribution sector through schemes such as Ujjawal Discom Assurance Yojana (UDAY), discoms continues to remain in stress while adding its losses with each passing year.

Discoms dues to gencos has already risen to Rs 1.3 lakh crore as of June, 2020, and their losses are projected to double to around Rs 58,000 crore this year. The outstanding debt with discoms is already over 4.5 lakh crore.

Singh said barring enduring discipline through tweaks in the funding mechanism,
a lot of improvement could be expected in discoms finances through the new liquidity infusion programme launched by the central government.

Out of the total provision of Rs 90,000 crore, an amount of Rs 68,000 crore has already been sanctioned against application for almost Rs 1,06,000 crore, Singh said and the balance would also be released once the ministry order on cabinet decision to relax working capacity limit under UDAY of 25 per cent of revenue is issued.

"Despite Covid, power sector was one sector that functioned normally. This meant that it continued to support all the sectors that are essential to keep the wheels of economic activities in the country moving," The minister said.

He said the various relaxations accorded to discoms to enable them to continue supplying electricity would not add further stress in the system as all schemes were designed with proper check and balance mechanism.

The liquidity window to discoms extends loans to them for a 10 year period with moratorium on payment for two years. The rate of interest in these loans is also low.

"We have taken off a lot of financial stress on the sector. They also now have to pay just 12 per cent as late payment surcharge against 18 per cent under the liquidity scheme. So we have given a huge relief to discoms and their outstanding would surely also come down," the minister said.