The Uttar Pradesh government has requested the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) for Rs 20,940 crore as loan to help its power distribution companies, seeking a sizeable chunk of the amount the central government plans spending to bail out the sector.

The total indicative amount from states for loans under the Atmanirbhar scheme has reached Rs 98,066 crore. Under the scheme, union government-owned power sector lenders PFC and REC give equal loan amounts to states that commit to follow a reform path indicated by lenders. The money is to be used for paying off dues of power-generating companies.

A senior official said the formal loan applications from all states now totals to Rs 87,320 crore. The two lenders have so far sanctioned Rs 34,246 crore of which Rs 11,222 crore has been disbursed. While REC has given out Rs 6,436 crore so far, PFC has disbursed Rs 4,786 crore.

The Atmanirbhar scheme is meant to tackle the liquidity crisis, but the Centre’s efforts to deal with discoms' losses and debts have not met with much success. Under the last discom reform scheme called UDAY, the national average AT&C loss was supposed to come down to 15 per cent by March 2019. It was, however, 22 per cent by then. According to an IDFC Securities report, the total losses of discoms stood at Rs 3.76 trillion on a negative net worth of Rs 80,600 crore at the end of March 2019.

Under the scheme's loan terms, states are required to have prepaid smart metering in government electricity connections. Besides, states should have a liquidation plan for subsidy and electricity bills payable to discoms. A system for timely payment of subsidy and electricity bills in future is also required.

Over the next three to four years, AT&C loss and average cost of supply and revenue have to be brought down. The aggregate technical and commercial loss (AT&C) or (power supply loss due to inefficient system) of discoms across the country was at 20.8 per cent and its financial loss was Rs 18,316 crore as on December 2019.

Maharashtra was the first state last month to get Rs 2,500 crore from REC under the Atmanirbhar scheme. PFC disbursed a similar amount to the state.

REC had earlier disbursed Rs 1,650 crore to Andhra Pradesh as the first tranche against sanctioned loan of Rs 3,300 crore. Telangana had also sought Rs 12,652 crore.

REC had sanctioned another Rs 2,000 crore for Punjab and Rs 2,032 crore for Rajasthan. While all the states will get a 10-year loan at 9.5 per cent, Punjab will get five years at 9 per cent.

Discoms across the country owed Rs 1.08 trillion to generators as in April. The scheme seeks to address liquidity problems of both discoms and generatorsUnion Finance Minister Nirmala Sitaraman, in her 15-point agenda to boost the economy battered by the coronavirus pandemic, announced a special loan scheme for discoms in May.

State governments would need to submit guarantees against the loans given to the discoms. Some of the states are in the process of approving guarantees to avail the money. PFC and REC will disburse loans in equal proportions.

The two lenders have raised money at above 7 per cent and further fund raising would depend on the requirement.