Cabinet relaxes working capital norm for discoms to get loan under Rs 90k cr liquidity plan

By: |
August 19, 2020 5:05 PM

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 Rs 90,000 crore liquidity infusion scheme.

They have pushed some larger suppliers into stopping doing business with UP discoms, industry sources said.Under the UDAY, the banks and financial institutions are restricted to lend working capital up to 25 per cent of a discom’s revenue in the previous year.

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 Rs 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 per cent of last year’s revenue. Now the limit is relaxed,” he further said. 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. 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 per cent 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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