PSPCL gets ₹4,000-cr boost, but free power subsidy gap remains

The Punjab government’s decision to avail an additional borrowing of 0.5% of the gross state domestic product (GSDP) has provided a significant financial boost to Punjab State Power Corporation Limited (PSPCL), which has received ₹4,004 crore.

This amount includes ₹504 crore in unpaid electricity bills from various Punjab government departments, pending since 2021, which the PSPCL had been struggling to recover.

The central government has allowed states to borrow an additional 0.5% of their GSDP annually for up to four years, provided they implement reforms to improve the power sector. As part of these conditions, states must take over 75% of the losses incurred by public sector power distribution companies (Discoms) in the 2023-24 fiscal year. Given PSPCL’s reported loss of ₹4,500 crore for the year, the Punjab government has allocated ₹3,500 crore to the PSPCL to comply with these guidelines.

Additionally, the Union finance ministry has mandated that state governments clear all outstanding electricity bills of government departments up to the 2020-21 fiscal. In line with this, the Punjab government has paid ₹504 crore to the PSPCL.

“It was unexpected that the PSPCL would receive such a large amount in cash from the government. Since the state opted for additional borrowing of 0.5% of the GSDP, they directed the funds to the PSPCL,” a PSPCL official said.

Despite this financial support, the PSPCL still faces challenges. An official familiar with the matter said while ₹4,000 crore has been provided, the state is falling short in covering the subsidy bill for free power. “We are hopeful that the government will not reduce the subsidy bill as this could lead to objections from the Centre regarding ‘book adjustments’ under the borrowing conditions. The Union power ministry is closely monitoring our balance sheets to ensure compliance with the stipulated guidelines,” he said.

Officials familiar with the matter said that the PSPCL is facing a shortfall of ₹4,500 crore in subsidy payments for free electricity in the state.

Chairman-cum-managing director, PSPCL, AK Sinha, who also holds charge of the finance and power departments, dismissed concerns about a financial crisis. “There is no financial issue in the PSPCL as the government has provided an additional ₹4,000 crore to meet the guidelines of the Union finance ministry for additional borrowing. As for the subsidy, the Punjab government remains committed to its payments. Over the past two fiscal years, we have fully covered the subsidy bill,” he said, allaying fears among PSPCL engineers of an impending financial crisis.