J&K power sector gets real shot in the arm

A loan assistance of Rs 11,024.47 crore has been approved for Jammu & Kashmir under the Atmanirbhar Bharat Abhiyan (ABA) – a liquidity infusion scheme in DISCOMs. This will enable J&K to clear its outstanding payments under power purchases made by it.

An MoU for availing of the second tranche of this loan for Rs 5444.47 crore was signed between JK Power Development Department, J&K Power Corporation Ltd. and Power Finance Corporation (PFC) in presence of the Principal Secretary PDD, Rohit Kansal at Srinagar today, 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 ED of the PFC Manoj Sharma joined the ceremony through video conferencing.

The agreement for availing of the first tranche of the loan for Rs 5580 crore had already been signed by the department with REC and PFC in October this year.

It may be recalled that 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 5580 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 today’s MoU J&K would be able to lift the full quantum of loan of Rs 11024.47 crore allotted to it enabling it to fully liquidate its power purchase liabilities as accumulated on 30 June 2020.

J&K has an annual power purchase bill of Rs 6000 crore to Rs 6500 crore against which the power recoveries are just Rs 2200 crore to Rs 2300 crore making for an annual deficit of Rs. more than Rs 4000 crore, the statement said.

The power purchase liability of J&K towards various CPUs  ending June 2020 had swollen to Rs. 11500 crore 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 1000 crore 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.