These loans are to be given against State guarantees for the exclusive purpose of discharging liabilities of Discoms to the generation companies. This, due to an unmatched cash flow problem emphasized by demand reduction has seen Discoms payables to power generation and transmission companies rise to Rs 94,000 crore, according to the ministry
May 14, 2020. By News Bureau
The freshly announced infusion of liquidity worth Rs 90,000 crore to Discoms against their receivables has been well acknowledged by the industry.
These loans are to be given against State guarantees for the exclusive purpose of discharging liabilities of Discoms to the generation companies. This, due to an unmatched cash flow problem emphasized by demand reduction has seen Discoms payables to power generation and transmission companies rise to Rs 94,000 crore, according to the ministry.
Prabhajit Kumar Sarkar, Managing Director & CEO - Power Exchange India Limited (PXIL):
“The Hon’ble Finance Minister’s announcement of infusing Rs. 90,000 crore into the Discoms of the country is a significant and welcome news given the perilous situation that entire power sector value chain had entered into due to the COVID 19 pandemic.
While a large portion of the Discom payables to generating and transmission companies had piled up over a period prior to COVID 19, yet the pandemic situation had rapidly heightened the cash flow crisis starting from the consumer right up to the generating companies and affecting all entities in between.
It has been proposed that this financial incentive would be linked to specific activities/reforms like Digital payments facility by Discoms for consumers, liquidation of outstanding dues of State Governments as well as Discoms’ plan to reduce financial and operational losses. Furthermore, the Rs 90,000 crore loan to be specifically used for discharging liabilities towards Gencos and Gencos in turn passing the benefit of rebates to Discoms such that they can be further provided to consumers, is also a welcome proposition.”
Rajiv Srivastava, Managing Director and CEO, Indian Energy Exchange Limited:
“The most remunerative source of income for DISCOMs from industrial and commercial users has been deeply impacted by the COVID-19 lockdown. The 90,000 crore liquidity injection is a welcome relief for financially stressed DISCOMs. The measures like PFC/ REC loans, rebates and reforms announced by the Central Government will go a long way in creating the much needed fiscal space in the power sector value chain.”
Sumant Sinha, CMD, ReNew Power:
“The 90,000 cr liquidity infusion into discoms will breathe fresh life into the power sector and protect distribution companies from
going bankrupt. This money will help the discoms to repay most of the Rs 92,000 crore outstanding payments that they owe to power generators, restarting the virtuous cycle of liquidity, higher investments and rapid growth for the power sector. This may also be an opportune time for the government to convince states to expedite distribution sector reforms so that distribution companies don’t need a bailout next time and are able to become financially viable entities.”
Maxson Lewis, Managing Director, Magenta Power:
"The Finance Minister's announcement focused towards MSME is the right approach. Making capital available to the MSME sector which is the biggest employer is welcome. The EPF contribution will make sure money will go to people who are working for it.
Cash infusion is required at the bottom of the pyramid."
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