The Power Finance Corporation Limited (PFC) has approved ₹306.07 billion (~$4.09 billion) as of July 31, 2020, as part of the liquidity package announced by the government for eligible distribution companies (DISCOMs).
The approvals follow the announcement from the finance minister that power DISCOMs would receive loans up to ₹900 billion (~$12.03 billion) to help recover from the coronavirus crisis.
This one-time liquidity injection is to be infused in two equal installments through REC Limited and PFC. The rider for these loans was that it would be given against state guarantees solely for clearing liabilities to power generating companies.
According to the Ministry of Power’s (MoP) payment ratification and analysis portal (PRAAPTI), the DISCOMs owed renewable generators ₹101.11 billion (~$1.3 billion) in overdue payments (excluding dues under dispute) spread across 544 invoices at the end of June 2020. The outstanding dues to the renewable generators stood at ₹8.4 billion ($111.9 million).
Now, PFC, along with REC Limited, has so far approved an amount of ₹600 billion (~$8.02 billion) as part of the liquidity package to the eligible DISCOMs.
Further, per the Reserve Bank of India (RBI) guidelines related to the COVID-19 regulatory package, PFC has offered a moratorium on payment of installments falling between March 01, 2020, and August 31, 2020, to eligible borrowers.
The company noted that following the moratorium policy, the company and its subsidiary REC Limited have granted a moratorium amounting to ₹216.4 billion (~$2.89 billion) until June 30, 2020.
As per the unaudited financial statement released by the company, the total revenue from operations stood at ₹169.1 billion (~$2.26 billion) at the end of June as compared to ₹145.9 billion (~$1.9 billion) during the same period last year. The profit before tax stood at ₹46.2 billion (~$617.8 million) as compared to ₹40.6 billion (~$542.9 million) during the same quarter last year.
In July this year, PFC released a report with key findings on the performance of state power utilities in the country for the financial year (FY) 2018-19. According to the report, the aggregate losses of all state power utilities rose to ₹528.38 billion (~$7.11 billion) in FY 2018-19. Karnataka, Maharashtra, Rajasthan, Gujarat, Delhi, Haryana, West Bengal, Chhattisgarh, Assam, and Tripura were the only profitable states during the year.
Mercom has pointed out that the poor financial performance of the DISCOMs has been weighing down the entire sector with their inability to pay power generators on time, manage their losses, and iron out other inefficiencies. In the past, the Indian government has come up with ways to bail out struggling DISCOMs from their mountains of debt. Programs like the Ujwal DISCOM Assurance Yojana (UDAY) were tailored specifically to provide much needed financial assistance but to no avail.
Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). More articles from Rakesh Ranjan.