Centre relaxes norms for PFC, REC to lend to discoms

To provide liquidity to the power sector, the Cabinet Committee on Economic Affairs on Wednesday approved a one-time relaxation to Power Finance Corporation and Rural Electrification Corporation for extending loans to distribution companies (discoms) above the limits of working capital cap of 25% of last year’s revenues.

“Currently, the power sector is facing problems… due to COVID-19, the consumption of electricity has fallen… and bills are not being paid on time. State discoms are facing issues, so to help them PFC and REC have been allowed to give loans above the limit more the 25% working capital limit,” Union Minister Prakash Javdekar said in a briefing. The government said the one-time relaxation will help provide liquidity to the power sector and ensure payments by States to discoms. An official statement noted that the outbreak of COVID-19 and the consequent lockdown had exacerbated liquidity problems for the power sector.

“Revenues of power distribution companies have nosedived as people are unable to pay for the electricity consumed while power supplies…. have been maintained,” it said, adding that the energy consumption has decreased substantially.

Power sector liquidity is not expected to improve in the short term, as economic activity and power demand will take some time to pick up. There is, thus, an immediate need to infuse liquidity in the sector for continuedpower supply, it added.

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