Srinagar, Dec 12 (IANS): A loan assistance of Rs 11,024.47 crore has been approved for Jammu & Kashmir under the Atmanirbhar Bharat Abhiyan (liquidity infusion scheme in DISCOMs).

This will enable J&K to clear its outstanding payments under power purchases made by it, officials said.

An MoU for availing the second tranche of this loan for Rs 5,444.47 crore was signed between JK Power Development Department, J&K Power Corporation Ltd and Power Finance Corporation in Srinagar on Saturday.

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 their power purchase liabilities to tide over financial crisis 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 5,580 crore through identified financial organisations i.e Power Finance Corporation Ltd (PFC) and Rural Electrification Corporation Ltd (REC) in October 2020.

With the signing of Saturday's MoU, J&K would be able to lift the full quantum of loan of Rs 11,024.47 crore 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 crore against which the power recoveries are just Rs 2,200 to 2,300 crore making for an annual deficit of around Rs 4,000 crore.

The power purchase liability of J&K towards various CPUs ending June 2020 had swollen to Rs 11,500 crore 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.