The special economic and comprehensive package of ₹20 lakh crore announced by Union Finance Minister Nirmala Sitaraman had much in store for cash strapped power distribution companies (DISCOMs) of Telangana.
It has given an opportunity for DISCOMs to clear in one stroke its dues of over ₹13,000 crore to generating stations that piled up before introduction of Letter of Credit (LoC) system on August 1 last year.
As per the LoC norms, the DISCOMs have been paying in advance and buying power from generators against projected demand on weekly basis. Yet, the dues of ₹13,000 crore accumulated earlier for lack of repayment capacity had remained. Much of the outstandings owed to 24-hour free power to agriculture sector and certain other concessions to various consumers.
In this context, the State government agreed in principle to let the DISCOMs raise a loan of ₹5,500 crore through issue of bonds for the specific purpose of payment of dues. But, orders to the effect were not issued.
In the ₹90,000 crore liquidity injection for DISCOMs announced by Ms. Sitaraman, the focus was on revenues of power distribution companies plummeting and their unprecedented cash flow problem accentuated by demand reduction. Therefore, it was declared that the Power Finance Corporation and the Rural Electrification Corporation will infuse liquidity of ₹90,000 crore to DISCOMs against receivables. The loans will be given against State guarantees for exclusive purpose of discharging liabilities of DISCOMs to generating companies.
The Average Revenue Requirement (ARR) of DISCOMs rose sharply since the introduction of uninterrupted 24-hour power to agriculture from January 1, 2018.
The ARR, which was ₹26,894.67 crore in 2016-17, shot up to ₹34,885.04 crore in 2018-19 and gradually swelled to an estimated ₹36,000 this year (2020-21). Though the demand on account of free power to agriculture went up, the State government did not hike its subsidy to DISCOMs proportionately.
This led to losses of DISCOMs growing in proportion to power demand. The State government had owned up ₹8,923 crore out of ₹11,244 crore dues of the two DISCOMS -- southern and northern -- at the time of Ujwal DISCOM Assurance Yojana (UDAY) agreements. The UDAY was a revival package of Centre for DISCOMS to find a solution to their financial crisis. It allowed State governments to take over 75% of their debt as of September 30, 2015 and pay back lenders by selling bonds. The latest package announced by Ms. Sitaraman was another big ticket offer to State governments to let DISCOMS overcome financial stress but the debt service rate of PFC and REC was said to be high.
