COVID-19 Update: Government Announces Rs 90,000 Crore Liquidity Injection For DISCOMs

The outbreak of Coronavirus has far-reaching impacts around the world but the Government is implementing various plans to counter the economic damage from the coronavirus. These packages offer an excellent opportunity to ensure that the essential task of building a secure and sustainable energy future doesn’t get lost amid the flurry of immediate priorities.

Recently, Prime Minister Narendra Modi announced a Special economic and comprehensive package of Rs 20 lakh crores – equivalent to 10% of India’s GDP. He gave a clarion call for the Self-Reliant India Movement. 

During the press conference which was recently held, Union Minister of Finance & Corporate Affairs Nirmala Sitharaman said in her opening remarks that the Prime Minister has himself ensured that inputs obtained from widespread consultation form a part of the economic package in the fight against COVID-19.

Following measures were announced:-

Rs 90,000 crore Liquidity Injection for DISCOMs

Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the DISCOMS to the extent of Rs 90000 crores in two equal installments. This amount will be used by DISCOMS to pay their dues to Transmission and Generation companies. Further, CPSE GENCOs will give a rebate to DISCOMS on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.

It has also stated that Revenues of Power Distribution Companies (DISCOMs) have plummeted and Loans to be given against State guarantees for the exclusive purpose of discharging liabilities of Discoms to Gencos. Digital payments facility will be provided to Discoms for consumers, liquidation of outstanding dues of State Governments and Central Public Sector Generation Companies shall give a rebate to Discoms which shall be passed on to the final consumers (industries). The government plan is to reduce financial and operational losses during this epidemic.

To provide relief to the business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.

Provision made for Rs. 20,000 cr subordinate debt for two lakh MSMEs which are NPA or are stressed. The government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.

Govt will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilize equity of about Rs 50,000 crores. E-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days.

Besides, General Financial Rules (GFR) of the Government will be amended to disallow global tender inquiries in the procurement of Goods and Services of the value of less than Rs 200 crores.

Sumant Sinha, CMD, ReNew Power in regards to this stated, “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.”

In past some of the actions taken by various Government bodies during coronavirus are: India’s Finance Minister Nirmala Sitharaman announced relief measures for taxpayers and businesses on statutory and regulatory compliance matters related to several sectors. The Ministry of Finance ordered that Coronavirus will be covered in the force majeure clause and should be considered as a case of natural calamity. The Ministry of New and Renewable Energy (MNRE) has issued a notice to Discoms stating to clear their dues regularly as was being done before the lockdown and the notice also states that they should continue to buy power from renewable energy producers but some state Discoms, however, used that order to start curtailing renewable energy power(Partially or completely) terming the prevailing situation a ‘force majeure’ condition. The Central Electricity Regulatory Commission (CERC) has rescheduled the implementation of the fifth amendment of deviation settlement regulations from April 1, 2020, to June 1, 2020. The Ministry of Power has directed CERC to provide a moratorium of three months to DISCOMs, to make payments to the generating companies and transmission licensees and not levy any penalties for late payments. The Punjab State Power Corporation Limited (PSPCL) In an email notice stated that the Ministry of Shipping has directed all major ports to ensure that no penalties, demurrage, charges, fees, or rentals are imposed on traders, shipping lines, concessionaires, licensees or other port users for any delays due to the lockdown in the country.