J&K power sector gets real shot in the arm

A loan assistance of over Rs 11 thousand crores has been approved for the Indian union territory of Jammu and Kashmir under the Atmanirbhar Bharat Abhiyan (ABA) – a liquidity infusion scheme in DISCOMs.
The loan assistance of Rs 11,024.47 crore will enable J&K to clear its outstanding payments under power purchases.
An MoU for availing of the second tranche of this loan for Rs 5,444.47 crore was signed between J&K Power Development Department, J&K Power Corporation Ltd. and Power Finance Corporation (PFC) in presence of the Principal Secretary PDD, Rohit Kansal at Srinagar, an official statement said.
The MoU, it said, was signed by the Director Finance PDD, M.H Malik and Chief Engineer JKPCL, Mohammad Yousuf Baba and Madhu Chakraborty GM, L&D PFC. The MDs of the DISCOMS, Chief engineers of PDD and other senior officers were present on the occasion.
The agreement for availing of the first tranche of the loan for Rs 5,580 crore has already been signed by the department with REC and PFC in October this year.
Under the Atmanirbhar Bharat Abhiyan, the government of India had announced a special package of Rs 90,000 crore for liquidity infusion in DISCOMs for clearing of their power purchase liabilities to tide over financial crises owing to low power recoveries.
In pursuance of this, Jammu and Kashmir immediately started fulfilment of pre-loan requisites and signed the MoU for the first tranche of the loan for Rs 5,580 crore through identified financial organizations i.e., Power Finance Corporation Ltd (PFC) and Rural Electrification Corporation Ltd (REC) in October 2020.
With the signing of this MoU, J&K would be able to lift the full quantum of loan of Rs 11,024.47 crores, enabling it to fully liquidate its power purchase liabilities as accumulated on June 30, 2020.
“J&K has an annual power purchase bill between Rs 6,000-6500 crores against which the power recoveries are just Rs 2,200-2,300 crores, making for an annual deficit of more than Rs 4,000 crores,” the statement said.
The power purchase liability of J&K towards various CPUs ending June 2020 had swollen to Rs. 11,500 crores which were being charged at a late payment surcharge (interest rate) of 18% per annum (late payment surcharge).
The loan assistance will enable savings of nearly Rs 1,000 crores to J&K on account of difference in rate of interest (late payment surcharge) that was otherwise being charged by the creditors against these power purchase liabilities.