InfoAlert - Relief measures to the power sector

Published On: 16/05/2020

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The ongoing nation-wide lockdown due to COVID - 19 has led to approximately 25% decline in power demand due to very low power offtake from commercial and industrial consumers this has, in turn, led to financial stress on the distribution companies ("Discoms") and the backlog of tariff payments to power generating and transmission companies by the Discoms. The payment defaults by Discoms can potentially have a significant impact on banks/NBFCs since a lot of project finance facilities availed by the generating and transmission companies can become NPAs.However, the Government of India on May 14, 2020 has announced certain steps to ease the financial positions of the Discoms by announcing a one-time liquidity infusion of INR 90,000 crores (Rupees ninety thousand crores) under the Atmanirbhar Bharat Abhiyan ("Government Package") to enable the Discoms to make payments to the power generating and transmission companies. Another step taken by the Government to ease the issues faced by the infrastructure sector is the relief provided to contractors in the nature of a INR 20 lakh crores (Rupees twenty lakh crores) Government Package, which also includes a 6 (six) months extension to contractors, without additional costs, to perform their obligations under various projects. INDUSLAW's Sabrina Afroze and Srijita Jha discuss the key reliefs offered to the Discoms and contractors.