PFC and REC Get Relaxation on Loan Disbursal for DISCOMs under UDAY Program

The Government of India (GOI) has approved a relaxation for Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) that have been tasked with managing the liquidity crisis of the distribution companies.

The Ministry of Power announced receiving the cabinet approval for one-time approval to extend loans to the distribution companies (DISCOMs). Earlier, the loans were capped at 25% of the working capital of the previous year’s revenues of the DISCOMs under Ujwal DISCOM Assurance Yojana (UDAY). This relaxation is to provide liquidity to the power sector and ensure payments by the state governments to DISCOMs.

This move follows the announcement from the finance minister that power DISCOMs would receive loans up to ₹900 billion (~$12.03 billion) to help recover from the coronavirus crisis. The rider for these loans was that it would be given against state guarantees solely for clearing liabilities to power generating companies.

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