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India: CCEA Relaxes Working Capital Norm for Discoms

The Cabinet Committee on Economic Affairs (CCEA) has given the Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC) a one-time relaxation to lend to stressed power distribution companies above the limits that were set under the Ujwal Discom Assurance Yojana (UDAY).

 

Under the UDAY scheme, discoms were not allowed to borrow from PFC and REC beyond certain levels.

 

These limits were introduced by the Centre to stop discoms from masking their losses by increasing liabilities.

 

After the relaxation, PFC and its subsidiary REC will be able to lend to discoms an amount more than 25 percent of the working capital of last year’s revenues.

 

There will be no limit for discoms to borrow from PFC and REC in 2020. This one-time relaxation will help in providing liquidity to the power sector and ensure payments by state governments to discoms.

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