The State government guarantees to various corporations were likely to be in excess of budget estimates this financial year, thanks to the Centre allowing power distribution companies of Telangana to raise ₹ 12,600-crore loan as part of Atmanirbhar Bharat package to infuse liquidity into the power sector.
The State had estimated in its budget proposals this year tentative risk weighted outstanding guarantees of ₹ 40,241 crore, comprising ₹ 22,380.84 crore for irrigation, ₹ 12,010.50 crore for Mission Bhagiratha meant for supplying potable drinking water to every household and ₹ 5,849.96 crore for other projects.
Now, the Centre had approved the State government’s proposal to raise ₹ 12,600 crore to clear off a lion’s share of outstanding dues of its power distribution companies (discoms) to Central generating stations, independent power producers and solar power generators. The State government issued an order giving counter guarantee for the loan immediately on receipt of Centre’s approval. With this, the total government guarantees will jump to ₹ 52,841.30 crore.
The government guarantee to loans of power sector was preceded by an ordinance amending the State Fiscal Responsibility and Budget Management Act which raised the limit on "the amount of annual incremental risk weighted guarantees from 90 per cent to 200 per cent of the total revenue receipts in the year preceding the current year". The limit was raised, keeping in view funding for major projects.
The latest government guarantee to power sector was subject to repayment and servicing of the loan by discoms and payment of 2% commission to government which amounted to ₹ 252 crore.
The outstandings of discoms till March 31 last was ₹ 14,333 crore but their receivables from government departments towards power charges was ₹ 12,609 crore. Therefore, the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC), the funding agencies, informed the discoms on May 16 that they were willing to lend solely up to the targeted collection. This was followed by a letter of the discoms four days later to the government seeking guarantees.
After the PFC and REC process the files, the loan to discoms would be adjusted against the borrowings from Central generating stations and others in their respective accounts. The loans of discoms had piled up since August 1 last year following the introduction of Letter of Credit system to purchase power from stations with which they had power purchase agreements (PPAs) on a weekly basis.
The latest bail out by Centre should be a big relief to solar power developers as their arrears were not met by discoms since September last year. The arrears to Singareni Collieries Company Limited had also mounted.