Covid-19 Economic Package: REC, PFC To Extend Loans To Power Discoms To Pay Dues To Producers

The six-week-long lockdown on account of Covid-19 and a drop in economic activity has led to a big fall in revenue for already beleaguered power distribution companies in India.

The move is a big positive, said Vivek Sharma, senior director - energy at CRISIL Infrastructure Advisory, as it will ease liquidity pressure.

“Discoms were not getting subsidy amount from the government and even the tariff hike had not happened in line with cost. So, a cash flow mismatch issue was there. Liquidity issue had affected the entire industry value chain,” Rupesh Sankhe, vice president-research (power and renewable) at Elara Capital, told BloombergQuint. “This will be positive for sector lenders like PFC, REC, and generator companies like NTPC, NHPC, SJVN, Power Grid Corporation and private players to reduce working capital.”

According to Girishkumar Kadam, power sector head at ICRA Ratings, liquidity support, if implemented, will certainly help the discoms to improve their payment pattern and clear dues towards independent power producers, given the impact on revenue and cash flows after covid lockdown. “Such support, however, may come subject to conditions and other features so as to improve the discipline/efficiency focus by the discoms.”

The finance minister also said relief would be provided to consumers. “Central public sector generation companies shall give rebate to discoms, which shall be passed on to the final consumers,” the presentation slide showed.

Concessional financing by financial institutions and rebates by CPSEs will ensure operational readiness of discoms to tide short-term liquidity issues. It will assist the sector value chain players, said Sambitosh Mohapatra, partner-power and utilities at PwC India.