Power Distribution Companies (Discoms) will be offered ₹90,000 crore liquidity support under the ‘Aatmanirbhar package’ announced by Finance Minister Nirmala Sitharaman on Wednesday.

Under the package, Power Finance Corporation and Rural Electrification Corporation will infuse liquidity in the Discoms to the extent of ₹90,000 crores in two equal instalments, an official statement said.

According to sector watchers, this package is laudable but its finer contours like the rate of interest at which this liquidity support will be offered will be the key to its success. The Discoms were undergoing severe stress due to non-payments by large, commercial and industrial consumers. This was hampering them from paying dues to Transmission and Power Generation Companies (Gencos) for electricity supplies. The Gencos were unable to pay the coal companies in light of the severe liquidity crunch induced by Covid-19 lockdowns.

The official statement said: This amount will be used by Discoms to pay their dues to Transmission and Gencos. Further, Central Public Sector Enterprises (CPSEs) GENCOs will give a rebate to Discoms on the condition that the same is passed on to the final consumers as a relief towards their fixed charges.

In a tweet shortly after Sitharaman's address, Minister of State (Independent Charge) for Power and New and Renewable Energy, R K Singh said, "The government has also decided to waive off 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."

"Concessional financing by Financing Institutions (FIs) and rebates by CPSEs will ensure operational readiness of Discoms - to tide short term liquidity issues. It helps the sector value chain," Sambitosh Mohapatra, Partner at PwC said.

“This line of credit to DISCOMS will certainly help liquidity situation with all sector entities such as Gencos, and fuel companies. Hopefully resuming economic economic activities will soon bring back the industrial and commercial customers back, though for demand to company to pre Covid days will take time," said Debasish Mishra, Partner at Deloitte.