The two power distribution companies (discoms) in the State – Southern Power Distribution Company of Telangana Ltd (TSSPDCL) and Northern Power Distribution Company of Telangana Ltd (TSNPDCL) – are set to improve their liquidity position with the State government according guarantee to ₹12,600 crore special long term transition loan to be borrowed by them.
They would borrow the money – ₹6,300 crore each from the Power Finance Corporation (PFC) and Rural Electrical Corporation (REC) – as part of the Special Economic Package (stimulus) announced by the Centre following the impact of the COVID-19 pandemic on the economy. The loan would be utilised to clear the outstanding dues of the discoms to Central Public Sector Enterprises, power generation companies (Gencos), transmission companies (Transcos), independent power producers (IPPs) and renewable energy generators.
As on March 31, 2020, the outstanding dues of the two discoms of Telangana to Central and State power generation and transmission companies and private power companies was at ₹14,333 crore. However, a lion’s share of it – ₹12,609 crore – is due from the State government departments at the end of 2019-20 financial year. The State government would provide unconditional and irrevocable guarantee to the long term loans to be borrowed by the discoms.
Letter of Credit
Following the introduction of Letter of Credit (LC) system by the Ministry of Power from August 1 last year, wherein giving the credit guarantee by the Discoms to the power producers/generators mandatory, the discoms have been under financial stress to adjust the money regularly in spite of delays in getting receipts from consumers.
They are forced to seek the State government’s help for adjustment of money for issuing LC to power producers from time to time.
“The delay in getting energy consumption charges from consumers during the lockdown has put the discoms under severe stress since they had to issue LCs to the power suppliers in advance so that they could encash them after the grace period of 45 days to 60 days as agreed to in power purchase agreements,” a senior official said, adding that the ₹12,600 crore loan would ease their liquidity position.
The borrowing is expected to have some impact on the retail supply tariff yet to be submitted by the discoms to the regulatory commission for approval.
