DISCOM liquidity

DISCOMs, got a liquidity boost of Rs 90,000 crore.

The Finance Minister Nirmala Sitaraman had announced a liquidity boost of Rs 90,000 crore as relief to the distribution companies, Discoms. The relief has been boon to the crucial part of the power sector as they are the worst hit and to reduce their operational and financial losses. However, the main aim is to benefit the end customers.

The announcement made for the Discoms and the details :-

The Government had made an announcement for providing liquidity of Rs. 90,000 crore to the Discoms through PFC-REC. It has been reported that the procedure of paying out is currently under progress, but REC and PFC, sector-specific lenders are going to lend. This would be on the basis of money lent at a spread of 150 bps, while raising capital from the competitive rates.

 The Finance minister also mentioned the loan would be on the basis of certain reform implementations. These shall include, State government’s liquidation of outstanding dues, reduce their operational and financial losses and digital payments for consumers. 

This relief was stated by Nirmala Sitaraman while speaking about the 15 measures to combat the economic disruption in the first tranche.  

Present condition :-

The dues of Discoms stand at Rs 90,577 crore as reported at the end of March 2020. 88% of them constitute to be overdues accompanied with 60 days or more payment default. Though the chart of dues charts is increasing, the situation has worsened because of the strains in industrial power demand and also and Logistic also in logistical constraints. 

How would it help discoms?

It has been noted that the money would be extended in two forms to the Discoms by the Power Finance Corporation and Rural Electrification Corporation. This raise shall happen against the guarantee by the state Government from the market. So that the Discoms have to repay loans or dues for transmission and generation companies. 

The money would also be contingent for Discoms in reaching different milestones for improving their efficiency. It would be in the form of clearing dues from state governments of a time period of 3 years. It shall also include smart meters installation and reducing as well as collecting losses through line because of old infrastructure or theft of power. 

It also consists of improvement in the system of billing for the Discoms. Debashish Mishra, leader at Deloitte had also stated that Discoms are running behind deficits of cash of upto 300 crores per day. Ashok Khurana had stated this will be a great help as it shall clear up bank dues for generators. So that they shall do the purchasing of coal for power supply ensuring continuous powers supply. 

There are many other relaxations provided too which are coming under the roof of Ujwal Discom Assurance Yojna, which have been targeted in a way for helping state power distribution companies that are debt-ridden. They would also be permitted borrowing with regard to working capital up to 25 percent. 

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