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

The government is considering relaxing working capital borrowing limits of power distribution companies

Power Finance Corporation, REC, State distribution utilities, Liquidity infusion package, Working capital borrowing limits, Power distribution companies, Financial institutions, Ujwal Discom Assurance Yojna, UDAY scheme, Electricity distribution companies, Maharashtra, Telengana, Andhra Pradesh, Uttar Pradesh, Meghalaya, Jammu & Kashmir, Tamil Nadu

The Power Finance Corporation (PFC) and REC have decided to offer 10-year loans to state distribution utilities at 9.5 percent for the next 60 days under the Rs 90,000 crore liquidity infusion package.

The government is considering relaxing working capital borrowing limits of power distribution companies to the extent required for borrowing under the liquidity infusion scheme, subject to a maximum of 35 percent to 40 percent of a discom’s previous year’s revenue.

Currently, banks and financial institutions can lend only 25 percent 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. PFC and REC have fixed interest rates under the liquidity package at 8.75 percent for three year loans, nine percent for five year loans, 9.25 percent for seven years and 9.5 percent for 10 year term loans.

The interest rates will be valid for the next 60 days. Electricity distribution companies of states including Maharashtra, 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 seven-10 days.

Uttar Pradesh is likely to approach 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.

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