Cabinet relaxes working capital norm for discoms to get loan under ₹90,000 crore liquidity plan

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

New Delhi The Union Cabinet on Wednesday approved a proposal to relax working capital limit norm for discoms under the Ujwal DISCOM Assurance Yojana (UDAY) to get loans as part of ₹90,000 crore liquidity infusion scheme.

After the Cabinet meeting, Union Minister Prakash Javadekar in a press conference said, “Power sector has a problem. There is a slump in power consumption. 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% of last year’s revenue. Now the limit is relaxed,” he further said.

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

However, some of the discoms were not eligible for getting loans under the package because they were not meeting working capital limit norms under the UDAY scheme.

Under the UDAY, the banks and financial institutions are restricted to lend working capital up to 25% of a discom’s revenue in the previous year.

The restriction was part of the UDAY scheme, which had been approved in November 2015 by the Union Cabinet for revival of debt-laden utilities.

Besides, the discoms can get loan under the package against the receivables from State governments to clear their dues. But some of the discoms did not have headroom under both the provisions.

Thus the power ministry had proposed to relax working capital limit norm so that these discoms can avail loans under the package to clear their dues.

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