India’s power distributors will get a ₹90,000 crore cash injection⁠— but Power Finance Corp and Rural Electrification Corp shares had already surged in anticipation

India’s power distributors will get a ₹90,000 crore cash injection⁠— but Power Finance Corp and Rural Electrification Corp shares had already surged in anticipation
India’s power distributors get a ₹90,000 crore cash injection Public Domain Pictures

  • The Finance Minister Nirmala Sitharaman today (May 13) announced a ₹90,000 crore cash injection to revive the DISCOMs (Power Distribution Companies).
  • This is part of the first tranche of ₹20 lakh crore stimulus measures announced by the government.
  • At present, DISCOM payable to power generation and distribution companies is nearly ₹94,000 crore.
The Finance Minister Nirmala Sitharaman today (May 13) announced a ₹90,000 crore cash injection to revive the DISCOMs (Power Distribution Companies) that have been facing a cash crunch, owing to the falling demand and revenues, amid the COVID-19 pandemic.

This is part of the first tranche of ₹20 lakh crore stimulus measures announced by the government.

At present, DISCOM payable to power generation and distribution companies is nearly ₹94,000 crore. “DISCOMs are in serious crisis in all states. In order to help them, Power Finance Corp (PFC) and Rural Electrification Corp (REC) will give loans to power distribution companies, against all the receivables on the books on the distributions companies,” Sitharaman said. This will be done in two equal installments with a state issuing guarantee for discharging liabilities to gencos.
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The shares of the two power companies - Power Finance Corporation and Rural Electrification Corporation surged on May 13, in anticipation of relief for the sector. The share price of PFC and REC went up by 8.5% and 12%, respectively.

India’s power distributors will get a ₹90,000 crore cash injection⁠— but Power Finance Corp and Rural Electrification Corp shares had already surged in anticipation
India's power finance stocks surged in anticipation of relief of the sector

As per the process, the central public sector generation companies shall give rebates to DISCOMs. Having received the infusion, DISCOMs will pass this to the consumer industries — the final customers. “We want the benefit to be passed to the customers. It is a one time infusion for the cash desperate DISCOMs,” she said.

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With this, the government aims to trim the financial and operating losses.

See also:
Deadlines for tax returns deferred⁠— and other tax reliefs announced by Nirmala Sitharaman
India’s stimulus promises to flush cash into the financial sector ⁠— some of it may reach real estate too

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