Fri. Mar 29th, 2024

KOLKATA: On Wednesday, PM Narendra Modi, in a national televised address, unveiled a comprehensive economic stimulus worth ₹20 Lakh Crore. One of the measures that the government announced, under this package, is to provide ₹90,000 Crores worth of liquidity infusion into the cash-strapped electricity distribution companies (Discoms).

The announcement itself was part of Finance Minister Nirmala Sitharaman’s press conference from Delhi where she specified the the measures to be funded by the first tranche of the stimulus package. “Discoms are facing unprecedented cash-flow problems,” Sitharaman explained.

With the restriction in movement in place, all across India, the nationwide lockdown shifted the load of electricity demand to residential section of the market, reducing the total demand. Additionally, commercial and industrial power demand have taken a massive hit. Discoms’ earnings have also fallen to about ₹12,000 Crore in the last billing cycle from about ₹55,000 Crore during a 30-45 days cycle in 2019. The closure of operations in several “non-essential” sectors seem to be the primary reason.

So, this liquidity infusion is meant help discoms, clear the outstanding debts they have towards public sector generation firms, transmission companies, independent power producers and renewable energy generators. These Discoms dues have creeped up to ₹94,000 Crore, making operations unsustainable for Gencos. Unpaid power producers were going as far as to consider stopping power supplies to states.

FM Sitharaman stated that under this plan, state-owned power sector financiers, Power Finance Corp. (PFC) and Rural Electrification Corp. (REC) will be infusing this liquidity of ₹90,000 Crore to Discoms in two separate tranches. Certain reforms such as increasing digital payment interfaces; prepaid metering in government departments and making action plans for loss reduction were linked, to this infusion, by the government. These concessional loans to Discoms will be extended with respective state guarantees. “..we are making it clear that these benefits should pass to the end consumers”, she added.

Earlier yesterday, power minister Raj Kumar Singh also tweeted out other plans to support the sector. His tweet stated, “the government has also decided to waive off the fixed charges and interstate transmission charges (by Power Grid Corp. of India) against the power not drawn from NTPC, DVC and other CPSE from the period from 24 March 2020 to 17-05-2020.”

This waiver of ₹0.22 in the price of each unit of state-owned Power Grid Corp. of India Ltd’s inter-state electricity transmission cost may end up helping Discoms save around ₹1400 Crore. But the condition that central public sector enterprises offer rebates and forgo fixed costs for power not consumed, during lockdown, will adversely impact earnings of electricity generators and transmission companies even though it might benefit end consumers.

This decision comes amid India’s proposed distribution reforms scheme—tentatively named Atal Distribution System Improvement Yojana (Aditya)—to cut electricity losses below 12%. The scheme aims to ensure continuous supply of power, adopting models such as privatizing state-run Discoms and promoting retail competition.

The government has been announcing a slew of measures to support other sectors of the Indian economy as well.

One of them was to broaden the upward definition of an MSME without changing any integral laws. The government also announced a fund of funds with a corpus of ₹10,000 Crore to fund the growth of MSMEs. Even those declared NPAs were included in a government measure worth ₹20,000 Crore, in subordinate debt to these MSMEs through a ₹4,000-Crore contribution to the credit guarantee trust for micro and small enterprises.

The government will also be asking states to extend the registration and completion dates of real estate projects suo moto by six months and advise them to treat COVID-19 as a ‘force majeure’ under the Real Estate Regulatory Authority Act.

On the other side, the government also announced that it will payout ₹20,000 Crore worth employee provident fund (EPF) contribution of both the employer and employees from eligible businesses for another 3 months until August.

Additionally, it also reduced the statutory contribution that a private sector employer and employee needs to make to EPF. This will provide a liquidity of ₹6,750 Crore to private sector firms and their employees, FM Nirmala Sitharaman said.

In another measure, the government has unveiled a reformation of full credit guarantee and a partial credit guarantee scheme to help NBFC sector maintain its cashflow during this crisis.

FM Sitharaman also announced tax concessions and liquidity support for several other market sectors as part of the government’s economic relief package named Atma Nirbhar Bharat Abhiyan. She also talked about JAM trinity solution—Jan Dhan Yojana, Aadhaar and mobile numbers—as a game-changing reform for better targeting of subsidies.

 

 

 

 

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