Industry body CII on Friday said discoms are likely to suffer a net revenue loss of around Rs 30,000 crore and liquidity crunch of about Rs 50,000 crore due to the coronavirus-induced nationwide lockdown.
According to government data, the discoms owe Rs 92,602 crore to Gencos as of February, 2020. In its report released on Friday, the CII has suggested host of measures like easy credit facility for discoms (from PFC and REC) to pay off its dues to Gencos, lower tariff especially for industrial and commercial consumers and deferral of indirect taxes like electricity duty, coal cess etc.
According to the report, power sector, one of the essential services under the lockdown till May 3, is battling the twin issues of demand and liquidity compression. Latest data from Power System Operation Corporation Limited (POSOCO) indicates that total demand per week between March 23 and April 12 was 18 BU (billion units), compared to 23 BU during the week of March 9-15 (before Janata Curfew and lockdown), 25-28 per cent reduction in demand.
The further extension of the lockdown could result in additional demand compression of 15 to 20 BU, implying a net revenue loss of Rs 25,000 to Rs 30,000 crores for the discoms, it said. This will further increase the liquidity crunch to Rs 45,000 to 50,000 crores, in addition to the Rs 90,000 crore dues pending by the discoms to generating companies' pre-lockdown, it said.
Recent experience suggests that a financial restructuring package without insistence on structural reforms leads to temporary alleviation of the problem in the sector followed by eventual recurrence of the core problems of liquidity. We therefore propose that the post COVID-era is the right time to undertake an ambitious overhaul of the sector, said Chandrajit Banerjee, Director General, CII in the report.
The report highlighted that the thermal generators could face additional Rs 20,000 crore to 25,000 crore cash crunch. Renewable energy generators have been bearing the brunt of power curtailments, overdue payments by state discoms of Rs 10,000 crores and policy uncertainty, it said. Further, 20 to 25 per cent of debt of renewable energy projects comes from overseas lenders, to whom the 3-month moratorium by RBI will not apply, it pointed out.
Transmission companies are facing delays in on-going projects as lockdown has affected the movement of manpower and supply resulting in delays and the manufacturing sector employing 20 lakh people across over 4000 SMEs could be at stake, it said. In such a scenario, it becomes increasingly important to inject liquidity in the sector to ensure continuous supply, power generation viability and robust industrial recovery post lockdown, it suggested.
CII's white paper Sustaining India's Power and Renewable Energy Sector analyses impact of COVID-19 on the sector with the demand reduction coupled with delays in collections. Short term measures include ensuring short-term liquidity management like creation of special line of credit through PFC/REC to discoms.
Secondly, the government can allow deferral of payments of indirect taxes and for mitigating impact of delays in on-going renewable projects it suggested an increase in tariff. Under medium-term reforms measures, it suggested to develop a roadmap to implement cost-reflective tariffs and rationalized tariff structure with lower commercial and industrial tariffs.
The central government could invest directly through a central holding company. It also asked to develop a central government-led funding scheme for accelerating the rollout of smart metering (investment of Rs 1.5 lakh crores over 4 to 5 years) and adoption of digital solutions for improving operational decision-making among discoms.
It said that the liquidity crunch of discoms is likely to worsen during and post the lockdown, and the gap may grow by 20-25 percent. The sector is likely to require significant transition financing to mitigate the impact.
The central power finance institutions (PFC, REC, and IREDA) should consider lending directly to discoms or to discount the discoms' outstanding dues using funds borrowed from banks or from their regular sources, it suggested.
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