With discom in dire straits, Power Ministry consults Finance Commission


A single financial package might not be sufficient for the power sector, as it grapples with financial distress over escalating discom losses that have been further aggravated due to the ongoing coronavirus pandemic.

According to reports, the Power Ministry has shed light on the aggravating situation of discoms and has made several suggestion for a reboot, so that these may be included in the final report by the 15th Finance Commission.

The report that is being prepared by the 15th Finance Commission will possibly include deeper sectoral reform and reanalysis of the aggravating conditions of the discoms.

The Finance Commission will now ponder over the request of relaxation for states in the borrowing limits under the Fiscal Responsibility and Budgetary Management (FRBM) Act and expanding borrowing space for states especially for power dues related concerns.

Power minister R K Singh has also directly taken up the issue with the 15th Finance Commission, as reported by ET.

The Commission will now mull over the discom issue and its overall impact on a state’s financial health as well as the efficacy of the Ujjwal DISCOM Assurance Yojana ‘(UDAY).

The power ministry has raised serious concerns on the exhaustion of borrowing limits under the FRBM Act by several states.

In such a situation, this will lead to their inability to stand guarantee to the Rs 90,000 crore central package announced this week.

In a bid to allow discom losses/dues to be included, the Power ministry has sought that the Finance Commission re-examine the FRBM borrowing limit for states.

The Ministry wants the FC to make this recommendation in its report, so as to pave way for states to amend the required laws for the same and to open up borrowing space for states to clear pending discom dues.

In addition to this, the Ministry has further suggested for provisions to be made so that dues to National Thermal Power Corporation be directly deducted by RBI from state budgets- an NTPC proposal.

Over 14,000 crore is due to be paid to NTPC from various state electricity boards. At discoms’ end- their overall dues to power producers are at a whopping Rs 90,577 crore as on March 2020. Over 80% of these are overdues with highest pending dues in Uttar Pradesh, Telangana, Karnataka, Ladakh and Jammu and Kashmir.

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