J&K to get Rs 11,000 cr to clear power sector liabilities

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Srinagar, December 12: To enable Jammu and Kashmir clear its outstanding payments under the power purchases made by it, a loan assistance of Rs 11,024.47 crores has been approved for the Union Territory under the Atmanirbhar Bharat Abhiyan (liquidity infusion scheme in DISCOMs).

An MoU for availing of the of the second tranche of this loan for Rs 5,444.47 crores was signed between JK Power Development Department, J&K Power Corporation Ltd. and Power Finance Corporation in presence of the Principal Secretary Power Development Department, Rohit Kansal at Srinagar pn Saturday. The MoU 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 5,580 crores 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, Jammu and Kashmir immediately started fulfillment of pre-loan requisites and signed the MoU for the first tranche of the loan of Rs. 5580 crores 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 11,024.47 crores allotted to it enabling it to fully liquidate its power purchase liabilities as accumulated on June 30, 2020.

J&K has an annual power purchase bill of Rs 6,000 to 6,500 crores against which the power recoveries are just Rs 2,200 crore to Rs 2,300 crore making for an annual deficit of Rs more than 4,000 crores. 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 cent per annum (late payment surcharge).  The loan assistance will enable savings of nearly Rs 1,000 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.