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Stimulus package: FM announces Rs 90,000 crore liquidity boost for discoms

Power Finance Corporation and Rural Electrification Corporation will infuse liquidity worth Rs 90,000 crore into discoms against receivables and loans would be given against state guarantees for "the exclusive purpose of discharging liabilities of discoms to gencos"

Manoj Sharma | May 13, 2020 | Updated 18:06 IST
Stimulus package: FM announces Rs 90,000 crore liquidity boost for discoms
Union Finance Minister Nirmala Sitharaman

As part of the Modi government's mega stimulus package worth Rs 20 lakh core, Union Finance Minister Nirmala Sitharaman on Wednesday announced liquidity injection worth Rs 90,000 crore for stressed power discoms. She said the revenues of power distribution companies had plummeted due to the coronavirus-infused lockdown, as it led to an unprecedented cash flow problem after demand plunged drastically.

The FM announced the Power Finance Corporation and Rural Electrification Corporation will infuse liquidity worth Rs 90,000 crore into discoms against receivables and that loans would be given against state guarantees for "the exclusive purpose of discharging liabilities of discoms to gencos". Notably, the total payables by various discoms to power general and transmission companies stand at Rs 94,000 crore.

Also read: What is the new definition of MSMEs?

The government has also announced plans to launch some key reforms, including digital payments facility by discoms for consumers and liquidation of outstanding dues of state governments, to reduce financial and operational losses. The FM said central public sector generation companies would give rebate to discoms, which would further be passed on to industries.

Industry experts believe economic activities that have been impacted due to the COVID-19 crisis could increase discoms' regulatory assets -- receivables from customers -- by up to Rs 90,000 crore. The financial infusion by the Centre could be a breather for such companies.

Besides, the FM also announced Rs 3 lakh crore worth collateral-free automatic loans for businesses, including MSMEs. "Business and MSMEs have been badly hit by the COVID-19 pandemic and they need additional funding to meet operational liabilities, buy raw material and restart businesses," the FM said. Subordinate debt is unsecured loans or known as junior securities. In case of default, creditors who own such debts are not paid till senior debtors are paid in full.

The FM also announced Rs 20,000 crore sub-ordinate debts for stressed MSMEs, which will likely benefit around 2 lakh micro, small and medium industries. The FM said that functioning MSMEs that are non-performing assets or stressed will also be eligible for such loans.

Also read: Nirmala Sitharaman Speech Live Updates: Provident Fund contribution of employers reduced to 10% from 12%

Also read: FM Sitharaman announces Rs 3 lakh crore collateral-free automatic loans for MSMEs

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