India plans $6.6b lifeline for virus-hit power firms

Bloomberg

India is planning to provide nearly $6.6 billion in loans to state power utilities as a slump in electricity demand squeezes liquidity while dues to generators pile up, according to people with knowledge of the development.
The loans, via state-run Power Finance Corp. Ltd. and its unit REC Ltd., will help the utilities, known as discoms, clear debts to both private and federal government-backed generators and will likely be disbursed this quarter, said the people, who asked not to be identified as the discussions are private. The two lenders want state governments to support the loans with guarantees and make budgetary allocations for timely repayments.
Power Finance and the power ministry didn’t immediately respond to emailed requests for comment. REC declined to comment.
The plan, part of efforts by PM Narendra Modi’s government to ease corporate cash squeezes amid nationwide restrictions to fight Covid-19, sets back earlier schemes to close the tap of easy money
for discoms and drive them to become more efficient.
Poor financial health of these utilities endangers India’s entire electricity industry and the banks that fund it.
The state-controlled discoms are not paid for nearly a fifth of the electricity they supply because of theft, poor billing and collection, or seepages through old wire networks. Delays in subsidy payments from their states for supplying cheaper power to farmers and the poor worsens their problems. A plan unveiled in 2015 failed to revive them, forcing the government to develop another wave of reforms.
“The low demand situation severely affects the financial health of the discoms, as they lose consumption of their paying industrial and commercial customers due to the lockdown” to fight the coronavirus, according to Debasish Mishra, a partner at Deloitte Touche Tohmatsu in India. “Once things return to normalcy, it could take much longer to revive the discoms, some of which were on a path to recovery.”
The utilities owed 924.2 billion rupees to generators at the end of February, rising 31% from a year earlier, mainly because of the accumulation of penalties for overdue payments.