Cabinet approves measures to provide liquidity in Power sector
New Delhi/UNI: The Cabinet Committee on Economic Affairs on Wednesday approved a one-time relaxation to Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) for extending loans to Distribution Companies in view of the financial stress caused by COVID-19.
The relaxation to PFC and REC for extending loans to Distribution Companies will be above limits of working capital cap of 25 per cent of last year’s revenues under Ujwal DISCOM Assurance Yojana (UDAY).
Briefing reporters after the Cabinet meeting, chaired by Prime Minister Narendra Modi, Union Minister Prakash Javadekar said one-time relaxation would help in providing liquidity to the power sector and ensure payments by state governments to DISCOMs.
The outbreak of the global pandemic COVID-19 in the country and the consequent nationwide lockdown has exacerbated the liquidity problems for the power sector.
Revenues of the power distribution companies have nose-dived as people are unable to pay for the electricity consumed while power supplies, being an essential service, have been maintained.
Energy consumption has decreased substantially.
The liquidity of the power sector 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 power sector for continuation of power supply.
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