Modi loosens the purse strings to help India’s struggling state utilities

Covid-19 hits to demand and bill payment collection have worsened the plight of the nation’s already debt-crippled power distribution companies, prompting the government to order an exceptional relaxation of lending limits.

The Indian government has relaxed the rules which cap the amount the nation’s cash-strapped electricity distribution companies (discoms) can borrow in a one-off move to add much-needed liquidity to the power sector.

The two bodies chiefly responsible for lending to struggling state discoms – the state-controlled Power Finance Corporation and the REC rural electrification body it holds a controlling stake in – can usually lend no more than a quarter of the revenues they have reported in the previous year, under the terms of the Ujwal Discom Assurance Yojana national program set up in 2015 to revive power company finances.

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