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

The Centre on Wednesday approved a proposal to relax working capital limit norm for electricity distribution companies (discoms) under the Ujwal DISCOM Assurance Yojana (UDAY) to get loans as part of Rs 90,000 crore liquidity infusion scheme.

The Union Cabinet chaired by Prime Minister Narendra Modi took this decision.

"Power sector has a problem due to various reasons. 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 the liquidity of the state discoms," Union Information and Broadcasting Minister Prakash Javadekar told the media after the cabinet meeting.

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

In May this year, Finance Minister Nirmala Sitharaman announced the Rs 90,000 crore liquidity infusion into discoms, which are facing a demand slump due to the coronavirus lockdown.

But, some of the discoms were not eligible to get loans under the package as they were not meeting the working capital limit norms under the UDAY scheme.

Following this, the Union Ministry of Power had proposed to relax working capital limit norm so that these discoms can avail loans under the package to clear their dues.