Three non-BJP ruled states are the first to apply for loans under the special liquidity infusion scheme floated by the Centre to revive the financially distressed power distribution companies (discoms). Andhra Pradesh, Rajasthan and Punjab have cumulatively asked for Rs 14,664 crore from the state-owned lenders Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).
Last month, the Finance Minister in her 15-point agenda to boost the economy, announced a special loan scheme for the discoms. The size of the loan scheme is expected to be Rs 90,000 crore. The loan is strictly for clearing the over dues of the discoms to the power generating companies, which stood at a record Rs 1.08 trillion, as on April, 2020.
Senior government sources said the loan application for these states are “under process” now and will be approved soon. The respective state governments would need to submit guarantee against the loans given to the discoms. PFC and REC will disburse loan in equal proportions.
“The amount which will be disbursed to the discoms would be lesser than requested and in tranches,” said a senior PFC executive. The rate of interest for this loan is expected to be in the range of 9-9.5 per cent. The executive requesting anonymity said they have borrowed recently at rate above of 7 per cent. “With the 150 bps spread allowed under this loan scheme, we would lend to the states in the range above 9 per cent,” said another executive.
To borrow more for this scheme, officials said, PFC and REC will issue bonds based on the initial demand that comes from the states. Executives in PFC and REC expect this amount to be around Rs 20,000 crore.
"The power ministry is in touch with several domestic landers like LIC, EPFO and private and government banks which had earlier subscribed to the discoms bonds. The government expects them to participate this time as well," said an official.
Apart from the three states, Uttar Pradesh and Karnataka have also evinced interest for taking loan under this scheme, however an official request is yet to come. “Uttar Pradesh, Karnataka, Telangana, Jharkhand and Jammu & Kashmir are some of the states which have indicated their interest in taking loan under this scheme. They have also indicated their loan request amount. Application from their side is expected by the end of month,” said an official.
When approved, this will take the total loan amount sanction to Rs 67,368 crore.
Maharashtra, Uttarakhand, Bihar and Tamil Nadu have asked for working capital loan totalling Rs 24,331 crore. Loan for Maharashtra of Rs 2,500 crore has been sanctioned, said an official.
Union minister of state for power, new and renewable energy R K Singh on Thursday said the total request for the loan from states stand at Rs 93,138 crore. The sanctioned amount in the first tranche would likely be close to Rs 20,000 crore.
To avail the loan, state government would need to clear the dues of government departments to the discoms and also give state guarantee to the lenders. The discoms would also need to indicate a trajectory of loss reduction – both financial and operational.
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.