PFC & REC to offer 10-year loans to state discoms at 9.5%

NEW DELHI: Power Finance Corp (PFC) and REC Ltd have decided to offer 10-year loans to state distribution utilities at 9.5% for the next 60 days under the Rs 90,000 crore liquidity infusion package while the government is considering relaxing working capital borrowing limits of power distribution companies.
Sources said the government is considering relaxing the working capital borrowing limit to the extent required for borrowing under the liquidity infusion scheme, subject to a maximum of 35%-40% of a discom’s previous year’s revenue.

Currently, banks and financial institutions can lend only 25% of a discom’s revenue in the previous year as working capital. This restriction was imposed after clearance by the Union Cabinet at the time of Ujwal Discom Assurance Yojna (Uday) scheme.

A senior government official said that PFC and REC have fixed interest rates under the liquidity package at 8.75% for three-year loans, 9% for five year loans, 9.25% for seven years and 9.5% for 10-year term loans. The interest rates will be valid for the next 60 days.

Electricity distribution companies of 8-9 states including Maharashtra for, Telengana, Andhra Pradesh, Uttar Pradesh, Meghalaya, Jammu & Kashmir and Tamil Nadu have expressed interest in borrowing the loans from PFC and REC for about Rs 60,000 crore loans and are likely to complete documentation in 7-10 days, he said.

Uttar Pradesh is likely to approach the two lenders for Rs 20,000 crore, Tamil Nadu for Rs 18,000 crore, Telengana for Rs 12,000 crore, Andhra Pradesh for Rs 6,500 crore and Maharashtra for Rs 5,000 crore. Some of these states have written to the Union power ministry seeking relaxation of the loan disbursement rules, including easing borrowing limits, he said.

The relaxation is required as most distribution companies are nearing their borrowing limits while some have already exhausted them.


The liquidity scheme classifies discoms into three categories based on their working capital borrowing limits and state government receivables. The loans will be provided to the discoms against guarantees by state governments and will be used to clear liabilities of power generation and transmission companies including renewable generators.

Discoms, which have headroom for further borrowing within the working capital limits prescribed under Uday will get immediate access to the loans from REC and PFC. Discoms that do not have headroom but have receivables from the state government in the form of electricity dues and undisbursed subsidy will also be eligible for these loans to the extent of receivables from the state government.

However, discoms that do not have receivables from states or headroom available under the working capital limits imposed under Uday need to ask the Centre for relaxation of the limit.