Centre relaxes working capital norm for discoms

The Cabinet Committee on Economic Affairs (CCEA) has given Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) a one-time relaxation to lend to stressed power distribution companies above the limits that were set under the Ujwal Discom Assurance Yojana (UDAY).

Under the UDAY scheme, Discoms were not allowed to borrow from PFC and REC beyond certain levels. These limits were introduced by the Centre to stop Discoms from masking their losses by increasing liabilities. After the relaxation, PFC and itssubsidiary REC will be able to lend to Discoms an amount more than 25 per cent of the working capital of last year’s revenues, said an official statement.

A Power Ministry official said that there will be no limit for the Discoms to borrow from the PFC and REC this year. This one-time relaxation would help in providing liquidity to the power sector and ensure payments by State governments to Discoms.

In May this year, the centre offered a ₹93,000-crore liquidity support under the ‘Aatmanirbhar package’ for Discoms. This support was in the form of soft loans, but some States were apprehensive of the strict terms under which they were offered.

“The outbreak of the global pandemic in the country and the consequent nationwide lockdown has exacerbated the liquidity problems for the power sector. Revenues of the power distribution companies have nosedived as people are unable to pay for the electricity consumed, while power supplies, being an essential service, have been maintained,” said an official statement.

“Energy consumption has decreased substantially. The liquidity of the power sector is not expected to improve in the short term, as economic activity and power demand will take some time to pick up. There is, thus, an immediate need to infuse liquidity in the power sector for continuation of power supply,” the statement added.