Govt relaxes working capital norms for discoms to provide further liquidity

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New Delhi (NVI): The Union Cabinet, chaired by Prime Minister Narendra Modi, today approved one-time relaxation in working capital limit norm for discoms under the Ujwal DISCOM Assurance Yojana (UDAY) to get loans as part of the Rs 90,000 crore liquidity infusion scheme.

After the Cabinet meeting, Union Minister Prakash Javadekar in a press conference said, “Power sector has problems. The bills are not being collected by them. PFC and REC have been allowed to give loans above the limit more the 25 per cent working capital limit. This will increase liquidity of the state discoms.”

“The working capital limit is 25 per cent of last year’s revenue. Now, the limit is relaxed,” Javadekar added.

The Cabinet Committee on Economic Affairs approved a one-time relaxation to Power Finance Corporation (PFC) and REC Ltd for extending loans to discoms above limits of working capital cap of 25 per cent of last year’s revenues under UDAY, according to the official statement.

One-time relaxation will help in providing liquidity to the power sector and ensure payments by discoms, it added. The COVID-19 outbreak and nationwide lockdown have exacerbated liquidity problems for the power sector.

Revenue of the power distribution companies has nosedived as people are unable to pay for the electricity consumed, while power supplies, being an essential service, have been maintained.

Finance Minister Nirmala Sitharaman had in May announced the Rs 90,000 crore liquidity infusion into cash-strapped discoms, facing demand slump due to the lockdown to contain Covid-19.