HomeEconomy NewsCOVID-19 package: FM Sitharaman announces Rs 90,000 crore liquidity injection for discoms

COVID-19 package: FM Sitharaman announces Rs 90,000 crore liquidity injection for discoms

The announcement made by finance minister Nirmala Sitharaman during her press conference comes amid unprecedented cash flow crunch faced by these companies due to plummeting revenues.

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By Anshu Sharma  May 14, 2020, 6:29:30 AM IST (Updated)

COVID-19 package: FM Sitharaman announces Rs 90,000 crore liquidity injection for discoms
The government has announced the injection of Rs 90,000 crore into power discoms (distribution companies) as part of the Aatma Nirbhar Bharat Abhiyan package.


The announcement made by finance minister Nirmala Sitharaman during her press conference comes amid the unprecedented cash flow crunch faced by these companies due to plummeting revenues.

The liquidity measure will help pay the dues of Rs 94,000 crore to the electricity generation companies (gencos) and transmission companies (transcos). She also announced that Central Public Sector Undertakings (CPSUs) will provide a rebate to state discoms which will have to be passed on to the industrial consumers.





"We want the benefit passed to the customers…we are making it clear that these benefits should pass to the end consumers," the minister said while measures that will be taken by the government to combat the economic disruption from the coronavirus lockdown.

"Appropriate structuring for bond issuance against guarantee will be critical to raise funds in the current tight liquidity situation. Besides, this is certainly a short-term measure,” said Vivek Sharma, Senior Director - Energy, CRISIL Infrastructure Advisory.

The loan from PFC, REC will be given against state guarantees for paying up the liabilities of discoms.

"It is a welcome development for a sector that has been facing unprecedented cash flow issues for a long time and the COVID-19 a situation further worsened it.  Linking this with specific reform measures will have a lasting effect and should help bring down discoms' losses in the long run. However, there will be a need to ensure that disbursements of pending dues are done evenly across the board, so that the IPPs, which are severely stressed due to outstanding receivables of discoms, equally receives the payments along with PSUs" said an industry source.

In return for liquidity measures, discoms will have to ensure digital payments for the consumers, liquidate dues of state governments to the discoms and also reduce financial and technical losses. Sources have told CNBC-TV18 that a monitoring committee will be formed to ensure discoms adhere to the conditions.

"These are one time solutions and have to be backed by sustainable reforms at the discoms to unshackle the sector. The linking of disbursement is linked to a few reforms like payment of government dues to discoms, plan to reduce financial and operational losses. While the devil always lies in details, it’s a welcome step for time being till the next crisis" said Mohit Kumar, Research Analyst, IDFC securities.

Meanwhile, Sitharaman also announced that CPSEs gencos will provide a rebate to the state discoms which will have to pass to the industrial consumers towards fixed charges.

"The government has also decided to waive off the fixed charges and interstate transmission charges by Power Grid against the power not drawn from NTPC, DVC and other CPSE from the period from 24th March 2020 to 17th May 2020" tweeted Minister for Power RK Singh.
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