The Cabinet Committee on Economic Affairs on Wednesday approved a one-time relaxation to Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) for extending loans to state-run electricity distribution companies (discoms), above their working capital limits under the Ujwal DISCOM Assurance Yojana, or UDAY.
The decision comes against the backdrop of some discoms being unable to avail the Rs1.25 lakh crore reform-linked loan package for clearing dues. With some fund-starved discoms neither having the headroom for borrowing more working capital, nor the requisite state receivables to clear their dues, the power ministry had circulated a cabinet note seeking a one-time exemption on working capital limits placed under UDAY, Mint reported on July 28.
“CCEA approves one-time relaxation to PFC and REC for extending loans to discoms above limits of working capital cap of 25% of last year’s revenues under UDAY,” the government’s principal spokesperson said in a tweet.
As part of its stimulus package to bring the economy back on track after the Covid-19 lockdown, the government announced this liquidity injection for discoms as part of the Atmanirbhar Bharat Abhiyan, backed by state governments’ guarantees.
The money is to be raised by state-owned Power Finance Corporation and Rural Electrification Corporation from the market against the receivables of discoms.