Multiple conditions on Discoms

Centre imposes many riders for States to avail ₹90,000-crore package

The Central authorities have imposed a number of conditions on State governments and their power distribution companies (Discoms) to avail themselves of benefits from the ₹90,000-crore package.

Also read: Central package a big ticket offer to DISCOMS

Called the ‘Special Long Term Transition Loan to Discoms for COVID-19', the financial assistance is meant to help the Discoms clear their dues to power producers, both belonging to the Central public sector undertakings (PSUs) and the private sector, and transmission companies. To be paid in two tranches, the loan will have a tenure of up to 10 years, including moratorium period of not exceeding 3 years.

The conditions have been stipulated at each stage, according to letters sent by the Central agencies, the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC), on Saturday to heads of the State utilities. The Discoms should submit an “unconditional and irrevocable” guarantee from the respective State governments with due approval from the State Finance Departments before the first disbursement.

Awaiting information

Officials of the Tamil Nadu Generation and Distribution Corporation (Tangedco) say they are awaiting information on the State-wise breakup of the overall amount, even though the communication of the REC & PFC refers to the amount outstanding as on March 31, 2020. In respect of the Tangedco, the figure is around ₹16,000 crore, of which approximately three-fourths are due to the Central PSUs.

As part of “pre-commitment conditions,” the Discoms should have arrangements for self-assessment by end consumers and digital payment of the bills, apart from installation of “smart” or pre-paid meters at the premises of the government departments and attached offices. If any State government fails to pay the power bill and subsidy within 60 days of the due date, it will be charged with an additional interest of 0.25% on the outstanding loan amount.

The insistence on “smart” or pre-paid meters is being made so that the Discoms get their dues regularly. As for the State governments, they should have a system by which the Discoms raise their bills for subsidies which should, in turn, be settled upfront every quarter or month.

Execution of pact

As regards “pre-disbursement conditions” for the first tranche, the borrowing Discoms should not have any overdue with the Central agencies. A quadripartite or tripartite agreement, involving the REC, PFC, Discom and the State government concerned, should be executed. The broad contours of such an agreement include liquidation plans for clearing dues, through three annual instalments, by the State governments towards unpaid bills from their departments, enterprises and local bodies and a plan for settling the unpaid subsidy amount to the Discom/ Discoms. The dues or subsidy paid by the State governments should be used to repay outstanding loan amount to the REC or the PFC in the ratio of loan originally disbursed. In case any State government does not adhere to the liquidation plan, an additional interest of 0.25% would be charged on the outstanding loan amount.

Prior to securing the second tranche, the State governments will have to endorse plans, to be prepared in consultation with the Union Power Ministry, for bringing down their Aggregate Technical and Commercial (AT&C) losses and the gap between Average Cost of Supply and Average Revenue Realisation (ARR) over three to four years.

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Printable version | May 28, 2020 8:24:38 AM |

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