Relief for power sector lacks voltage? | India Today Insight

The relief package is a booster shot, but it will take a lot more for the electricity sector to improve in the short term??

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A power grid project in in Shrirampur, West Bengal.

Three months after announcing a relief package for distribution companies (DISCOMs), the Cabinet Committee on Economic Affairs [CCEA] met again on August 19 to expand the pool of funds announced in May, while also relaxing the criteria that would make states eligible to take on one-time debt to clear up their dues pending with generation and transmission companies.

The CCEA allowed DISCOMs to take working capital with a cap of 25 per cent of last year’s revenue, under the Ujwal DISCOM Assurance Yojana (UDAY). Till June, these DISCOMs had dues worth over Rs 1.19 lakh crore. The new criteria will open up avenues for states to take debt up to Rs 1.25 lakh crore from the sectoral NBFCs, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC). This will allow eight states, including Tamil Nadu, Bihar, Jammu and Kashmir and Odisha, to take the debt and pay the dues. These states had already reached their limit and were not eligible to take on additional debt.

This will also make life easier for players like NTPC, Tata Power, Adhunik Power and Adani Power, along with several renewable energy players and power grid and trading company Power Trade Corporation, which had dues pending for more than three to six months. In the first quarter, with demands nosediving, generation companies like Adani Power posted losses worth Rs 683 crore, and Tata Power posted profits, but with a revenue loss of 11.8 per cent. The lockdown exacerbated the liquidity problem for DISCOMs as well, as electricity consumption at commercial units crashed.

This set of fresh debt might be a booster shot for the power sector, but the condition of the electricity segment is not expected to improve in the short term, largely because economic activity is not picking up exponentially and will require some time to take off.

The pressure on DISCOMs is multi-pronged. Various industry lobby groups are asking their respective states for relaxation, at least for the lockdown period, in the fixed cost of power. And the DISCOMs are still finding it difficult to realise consumption bills, but have to continue supplying electricity to the consumers. A few states have incentivised online payments of electricity bills.

In May, finance minister Nirmala Sithraman had announced a Rs 90,000 crore liquidity infusion into cash-strapped DISCOMs. The cut-off date for the package was March 31, 2020. Till then, the DISCOMs had overdues worth Rs 90,577 crore. However, the R.K. Singh-led power ministry soon informed her that this might not be sufficient. The condition of DISCOMs is only worsening. Among the states facing the worst of it are Rajasthan, with dues of Rs 34,971 crore; Tamil Nadu, with Rs 18,077 crore; Uttar Pradesh, with Rs 13,694 crore; Maharashtra, with Rs 11,399 crore; Telangana, with Rs 7,180 crore; Karnataka, with Rs 6,393 crore; and Jammu & Kashmir, with Rs 5,865 crore. Collectively, these states make up 80 per cent of the dues of GenCos and TransCos. There was a dire need for the Wednesday decision to infuse liquidity in the power sector for continuation of power supply. And those who know the sector will tell you that more will be required soon.

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