The Centre is offering ₹90,000 crore in soft loans under the Aatmanirbhar Bharat package for power distribution companies (discoms) — only it has found no takers. According to officials in the know, the State governments do not want to take the liability of paying back these loans that are offered to the discoms.

“States are apprehensive in giving guarantees for the exclusive purpose of discharging liabilities of discoms to power generation companies (gencos),” an official said. These additional liabilities will put pressure on the balance sheets of the State governments, who are struggling with held up GST disbursals and lower revenue on account of a slump in economic activity during the Covid-19 lockdowns.

Under the Aatmanirbhar package announced by Finance Minister Nirmala Sitharaman on May 13, Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) were to infuse liquidity of ₹90,000 crore into the discoms in two equal instalments. The amount of soft loan a discom could get was dependent on the amount it owed power generation and transmission companies.

This was done to address the “unprecedented cash flow problem accentuated by demand reduction” in the power sector. A presentation accompanying the announcement had said that discom payables to power generation and transmission companies nationwide stood at ₹94,000 crore.

Low interest rates

These soft loans were to be given by PFC and REC at low interest rates — anywhere between 8.5 and 9 per cent. Apart from that, these loans were repayable over 10 years with a two-year moratorium.

It was assessed that there would have been a direct saving of 20-25 per cent in the electricity bills raised in May for residential consumers after the measures undertaken by the government. This assessment seems to have fallen flat with no State government seeking to avail themselves of these loans.

In a tweet shortly after Sitharaman's address, Minister of State (Independent Charge) for Power and New and Renewable Energy, RK Singh had said: “The government has also decided to waive the fixed charges and interstate transmission charges (by Power Grid) against the power not drawn from NTPC, DVC and other CPSE from the period from March 24, 2020 to May 17, 2020.”

Analysts had assessed said that concessional financing by financing institutions and rebates by CPSEs would ensure the operational readiness of discoms to tide over short-term liquidity issues and help the sector value chain. But with no State wanting to make use these loans, such gains may not be reaped.