Government Relaxes Working Capital Norms For Power Distribution Firms

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The federal government on Wednesday accepted a proposal to provide one-time rest in working capital restrict norm for energy distribution corporations (discoms) underneath the Ujwal DISCOM Assurance Yojana (UDAY) to get loans as a part of the Rs 90,000 crore liquidity infusion scheme. Addressing the media after the cupboard assembly chaired by Prime Minister Narendra Modi, Union Minister Prakash Javadekar stated, “Energy sector has issues. The payments should not being collected by them. PFC and REC have been allowed to provide loans above the restrict extra the 25 per cent working capital restrict. It will enhance liquidity of the state discoms”.

“The working capital restrict is 25 per cent of final 12 months’s income. Now, the restrict is relaxed,” Mr Javadekar stated.

In accordance with an official assertion, the Cupboard Committee on Financial Affairs accepted a one-time rest to Energy Finance Company (PFC) and REC Ltd for extending loans to discoms above limits of working capital cap of 25 per cent of final 12 months’s revenues underneath UDAY.

One-time rest will assist in offering liquidity to the ability sector and guarantee funds by discoms, it added. The COVID-19 outbreak and nationwide lockdown have exacerbated liquidity issues for the ability sector.

Income of the ability distribution corporations has nosedived as individuals are unable to pay for the electrical energy consumed, whereas energy provides, being an important service, have been maintained.

Vitality consumption has decreased considerably. The liquidity of the ability sector will not be anticipated to enhance within the quick time period, as financial exercise and energy demand will take a while to choose up. There may be, thus, an instantaneous have to infuse liquidity within the energy sector for the continuation of energy provide, it added.

Finance Minister Nirmala Sitharaman had in Might introduced the Rs 90,000 crore liquidity infusion into cash-strapped discoms, going through demand droop because of the lockdown to comprise COVID-19. Nonetheless, a number of the discoms weren’t eligible for getting loans underneath the bundle as a result of they weren’t assembly working capital restrict norm underneath the UDAY scheme.

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