The Cabinet Committee on Economic Affairs (CCEA) has provided one-time relaxation to power distribution companies (DISCOMs) regarding borrowing limits in order to assist them in clearing their dues.
Under the limits stipulated in the UDAY scheme, the DISCOMs could earlier borrow only up to 25% of their previous year’s working capital from Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), which has now been relaxed one-time to help those that have exhausted their borrowing limits.
It is pertaining to note that revenues of DISCOMs affected by COVID-19 have nosedived due to the liquidity issues, as they were not paid for the power which was continually supplied as a part of essential services. This resulted in huge amount of outstanding payment towards the power generation companies.
Notably, power producers’ total outstanding dues owed by distribution firms rose over 46% y-o-y to INR 1.33 Lakh Crore in Jun ’20, reflecting stress in the sector.
With liquidity of power sector not expected to improve in short-term, the measure has been taken to ensure proper cash flow in the system for uninterrupted power supply in the country.
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