Govt may raise working capital borrowing limit for discoms

New Delhi (IANS) The Power Ministry has sought cabinet approval for raising the working capital borrowing limit of financially stressed state electricity distribution utilities to help them access the Rs 1.25 lakh crore liquidity support offered by the Centre under the Aatmanirbhar Bharat Abhiyan to clear dues of generation companies.

At present, banks and other financial institutions can lend only 25 per cent of a discom's revenue in the previous year as working capital. This limit has made several discoms ineligible to access the central liquidity support package as it's either available against headroom available within the working capital limits or against the state government receivables in the form of power dues and subsidy not disbursed.

According to sources close to the development, the Power Ministry has moved the draft cabinet note and has left it for the cabinet to decide the revised limit. It could be raised by 10-15 per cent or more than the current limit, fixed after the government approved the Ujwal Discom Assurance Yojna (UDAY) in November 2015.

"Higher working capital limits could help several discoms that have exhausted the limit or have no receivables to get access to the Rs 1.25 lakh crore liquidity window. This would in turn help clear generators' dues and allow minimum disruption in the power sector that is facing a demand squeeze due to the Covid-19 pandemic," said a power sector analyst.

The Power Ministry has decided that enhanced working capital limits will be approved by it on case-to-case basis (to the extent approved by the cabinet) to ensure full coverage and security of the long-term 10-year concessional loan being offered through state-owned Power Finance Corporation and REC.

Under the Aatmanirbhar Bharat package, the Centre announced concessional loan for discoms to the tune of Rs 90,000 crore to cover their dues to generation companies up to March 31, 2020. The package corpus is expected to rise to Rs 1.25 lakh crore as dues up to June will now be covered.

The liquidity support to discoms will help in clearing dues towards power producers and help restart the virtuous cycle of cash flow in the sector.