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14 May
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Liquidity booster for Discoms, state guarantee to rescue

admin   |   Solar, solar industry

The government’s announcement of Rs 90,000 crore liquidity injection comes as a relief for Discoms. It will be, however, essential to see as to what extent the discoms can avail the scheme given the ‘tied’ nature of this support and requirement of State Government guarantee—shares Care Ratings. 

The announcement of Rs 90,000 crore liquidity injection for discoms comes at the right time considering significant cash flow issues for discoms with the record decline in demand and lower collections given the lockdown related restrictions. 

It will be, however, essential to see as to what extent the discoms can avail the scheme given the ‘tied’ nature of this support and requirement of State Government guarantee, according to Care Ratings. 

As per yesterday’s government announcement, state-run Power Finance Corp (PFC) and REC Ltd shall infuse liquidity of Rs 90,000 crore in discoms against their receivables. Loans shall be given against State Government guarantee for the exclusive purpose of discharging liabilities of discom to gencos. The funding shall be linked to specific activities/reforms like the liquidation of dues of State Government to discoms, reduction in operational and financial losses and digital payment facility being offered by discoms. Besides, central public sector generation companies shall give a rebate to discoms which shall be passed on to the end consumers.  

In CARE Ratings’ opinion, with this measure essentially the power sector problem is being shifted to the state government, and the achievement of reform intent will be a challenge as has been proven time and again.  

Notably, delay in payment against power purchase by the distribution companies (Discoms) is the biggest source of liquidity stress for the generation companies (Gencos). 

As per the data available on the PRAAPTI portal of government of India, as on March 31, 2020, the total overdue debtors of the discoms towards gencos stood at more than Rs 76,000 crore. Currently, discoms’ payables to both power generation companies and transmission companies stand at around Rs 94,000 crore.