Centre working on package to offer loans to state discoms

The Union Ministry of Power is arranging loans from the PFC and REC

Central government, Loans to state power distribution companies, Discoms, Electricity generation plants, Prevent blackouts, Severe liquidity crisis, Union Ministry of Power, Power Finance Corporation, REC, Power plants, Payments to coal companies, Freight charges

The Central government is working on a package to offer loans to state power distribution companies (DISCOMs) to help them clear dues of electricity generation plants to prevent blackouts as the projects face a severe liquidity crisis.

The Union Ministry of Power is arranging loans from the Power Finance Corporation and REC to distribution companies that can be used only to clear portion of the Rs 92,000 crore dues they owe to power plants.

The ministry also came to the rescue of the power plants through a clarification, which stated that the distribution companies will have to continue meeting their payment obligations and pay fixed charges to the projects even in case electricity offtake is not taking place due to less demand.

The Centre is not liquidating the entire discom dues of Rs 92,000 crore. This is not a bailout package for distribution companies.

Rather the government is just helping power plants with certain amount of liquidity to keep them going for another two-three months till the pandemic is over. It is just simply a window being opened for discoms to get money to be able to pay the debt. If they do not pay right now and the generators do not have money, payments to coal companies, freight charges, employees and lenders will become a major issue.

As per the plan, the financiers will pay the power plants on behalf of the distribution discoms and these will show as debt on the books of discoms.

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