The Centre’s effort in improving the liquidity position of state-owned power distribution companies is a one-time relief during the lockdown period. Suggesting a three-pronged approach, the Union ministry of power is hopeful that several states will come on board for subscribing to the special loan scheme.
Speaking with Business Standard, Union Minister of State for Power, New and Renewable Energy, R K Singh, said the loans given to discoms for paying their dues would be at concessional rate of interest. Discom overdues to generation companies touched a record Rs 92,000 crore in February this year. For the month of March, it stands at Rs 77,000 crore, according to the PRAAPTI portal of ministry of power.
“The outstanding payment of the discoms towards power generating companies (gencos) has a late payment surcharge of 18 per cent. We reduced this to 12 per cent for the period of lockdown. But after lockdown, it will be again be 18 per cent. So against that 18 per cent burden that discoms would have given, we are offering them loan at an interest rate of 8-10 per cent,” said Singh, “This is a soft loan which will give major relief to the sector. Discoms will get rid of the dues and generating companies will get paid. So, it will be in the interest of states to take this loan.”
The Centre on Wednesday announced Rs 92,000 crore liquidity infusion in the power distribution sector. Singh said this is the amount that power sector lenders Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) would give to the discoms.
“Normal spread that PFC and REC put on their loans is 2.5-3 per cent. For this loan, the spread would be 1.5 per cent. So, the loan would be available at lower rates. This is to be repaid over 10 years with a moratorium of two years,” he said.
The minister, however, said the states would have to submit a loss reduction trajectory to PFC and REC. “The lenders can recall the loan if a discom doesn’t adhere to it,” said Singh. He said the state governments would also have to ensure that any power dues of government departments towards the discoms are paid. “The subsidy that any states gives on the electricity bill would also have to give in advance to the discom,” he said.
The national aggregate technical and commercial loss (AT&C) or power supply loss due to inefficient system of discoms was at 20.8 per cent and its financial loss was Rs 18,316 crore as on December 2019. Under the last discoms reforms scheme, UDAY, the national average AT&C loss was supposed to come down to 15 per cent by March 2019.
The other two components of the relief package aim at reduction in the cost of power. The central government gencos such as NTPC, NHPC, DVC, etc will give discount on the tariff they charge from discoms for sale of power. “For the period of lockdown, central gencos will give discount to the tune of 20-25 per cent on the power drawn by the discoms. We want states to pass on this discount to the consumers with lower power rates,” said Singh.
The central gencos would also defer the fixed cost payment for the power which is not being drawn by the states. Tariff of thermal power plants has two components – fixed cost which is the capital cost and variable cost which is the fuel cost. Under a long term power purchase agreement (PPA), buyers are obliged to pay the fixed cost to generators even if they do not procure power during a certain period.
“Fixed charge against the power which is not bought has been deferred. That will be repaid three months after the lockdown in three instalments with no interest payment,” Singh said. Earlier, the union ministry of power had earlier deferred interest payment on the outstanding dues to generating companies.
This, the minister said, would be beneficial for the industries which were closed during the lockdown. He said the state which get discounted power should pass on the benefit to their industrial consumers. “We expect this relief to be passed on to the industries which were closed during the lockdown. As the price of power will come down, common man will get cheaper power and industry will get deferment in paying the fixed cost for the power they did not use,” said Singh.
The minister said discoms would have to get back to the prepayment mode of power supply as soon as the lockdown ends wherein they would have to pay generation companies first and then power would be supplied.