Govt working on package to offer loans to state distribution companies

The government is working on a package to offer loans to state power distribution companies to help them clear dues of electricity generation plants to prevent blackouts as the projects face a severe liquidity crisis.

The power ministry is arranging loans from Power Finance Corp and REC Ltd to distribution companies that can be used only to clear portion of the ₹92,000 crore dues they owe to power plants, a senior power ministry official said. ET had on March 24 reported that recovery of dues by private plants from discoms has been significantly impacted as they are not able to make collections due to the lockdown.

The ministry also came to the rescue of the power plants through a clarification on Monday, which stated that the distribution companies will have to continue meeting their payment obligations and pay fixed charges to the projects even in case electricity offtake is not taking place due to less demand.

The official said the proposal is to ensure liquidity. “We are not liquidating the entire discom dues of ₹92,000 crore. This is not a bailout package for distribution companies,” he said. “Rather we are just helping power plants with certain amount of liquidity to keep them going for another 2-3 months, till the pandemic is over. It is just simply a window being opened for discoms to get money to be able to pay the debt. If they do not pay right now and the generators do not have money, payments to coal companies, freight charges, employees and lenders will become a major issue.”

The official said many plants have raised money abroad and they don-t have 3-month moratorium as allowed by the Reserve Bank recently. He said the support will be in the form of regular loans from Power Finance Corp and REC. The ministry is identifying the dues to be repaid.

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