Due to demonetization, Rs 500 and Rs 1,000 denominations can be used to pay pending utility bills which will help discoms due to their huge backlog of unpaid bills.
Demonetization has turned out to be a positive event for the power sector with distribution companies recovering pending power bills from their customers, Mercom Capital Group said on Monday. Quoting a number of discoms and government officials on the issue, the consulting firm also said that the power sector could also benefit from relaxed lending and lower rates, among other things. "Demonetization has been chaotic and changing the way the Indian economy functions...banks suddenly flush with funds, all of which could relax lending to the power sector and potentially bring down interest rates," it said.
The government has mandated that the old notes of Rs 500 and Rs 1,000 denominations can be used to pay pending utility bills which will help discoms due to their huge backlog of unpaid bills. Discoms are expecting a substantial influx of payments prior to the December 31 deadline after which these currency notes will become invalid. For cash-strapped discoms this is unexpected good news, it said.
It quoted an official at Maharashtra State Electricity Distribution Company Ltd as saying, "since the announcement of Demonetization, discoms in the state have seen payments of old bills cross Rs 1 billion ($14.74 million) within a week. The signs are positive as this will financially empower the discoms".
Due to the amnesty of taxes and penalties provided to black money holders (unaccounted currency), the government will have a huge influx of money that can to be allocated for infrastructural development and funding new projects, stated an official at Transmission Corporation of Telangana Ltd (TCTL), it said.
"India is largely a cash economy so in the short-term Demonetization is going to hurt installations as small developers will find it tough to pay for land acquisition, but in the long-term it will be beneficial as dicoms will get paid, lending rates will fall and foreign investment will increase in the face of a falling rupee and rising dollar," Mercom said quoting an official at the Ministry of New and Renewable Energy (MNRE).
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