Rs 90,000 crore discom booster a power push for economic revival: RK Singh, Minister for Power

NEW DELHI: The ₹90,000 crore liquidity booster for distribution companies announced on Wednesday will kick-start a chain of payments that will make power and related sectors like coal viable, minister for power and renewable energy, RK Singh told ET in an exclusive interview.

Power Finance Corp and REC Ltd are all set to launch on Thursday the liquidity-boosting scheme announced by finance minister Nirmala Sitharaman. They will offer loans at lesser rates to distribution companies, while the power ministry is pushing the finance ministry to give the sector access to low-cost funds at repo rate.

Singh is confident that electricity demand will revive soon, and that measures to boost MSME, real estate and power sectors will put the economy back on track.


He said central public undertakings such as NTPC, DVC and Power Grid Corp will take a hit of ₹3,000 crore by waiving off fixed charges.

LTRO Financing Sought: Singh
These charges are for electricity not drawn by discoms during lockdown. But their high regulated return on equity minimises the impact.

“The package was absolutely necessary and is a great boost for the sector as all outstanding dues of the generation companies have been taken care of. Viability of distribution companies will go up too because the dues attracted delayed payment surcharge ranging from 12% to 18% which will be replaced by loans of lower rates, say 8.5%- 9% with 10-year repayment. When the coal companies get paid, the railway freight gets paid, the whole sector becomes viable,” he said.

Normally the spread of PFC and REC is 2.5%-3% but they have agreed to reduce it to 1.5%. The rate of interest will be same for all discoms, Singh said.

The power ministry has approached the finance ministry for access to finance through long-term repo operation (LTRO), under which the central bank offers money to banks at repo rate.

“My demand stays and I will pursue it again. I want to access the LTRO funds which come at about 4%. If I get that, the cost of funds to discoms will go further down,” Singh said.

He added that the power ministry had the jurisdiction to allow central public sector enterprises (CPSEs) to waive off the fixed charges.

“This was one major burden on the discoms during the period of lockdown because the demand had come down with all the industrial and commercial establishments being closed. Waiver of the fixed costs is a huge relief for discoms and falls within the jurisdiction of the power ministry. We have the finance ministry’s approval. The total impact will be in the range of ₹3,000 crore for all CPSEs for power not drawn,” he said.