By IANS,
New Delhi : In a relief to the troubled power sector, the union cabinet Monday approved the proposal to restructure debt worth nearly Rs.200,000 crore of state electricity companies (Discoms).
As part of a scheme for the financial turnaround of Discoms approved by the Cabinet Committee on Economic Affairs (CCEA), state governments are to take over 50 percent of Discoms’ short-term liabilities.
A power ministry release annoucing the scheme for “Financial Restructuring of State Distribution Companies (Discoms)” said, “50 percent of the outstanding short term liabilities up to March 31, 2012, to be taken over by State Governments. This shall be first converted into bonds to be issued by Discoms to participating lenders, duly backed by State Governments’ guarantee.”
State governments are to take over liability from Discoms in the next 2-5 years by way of special securities, repayment and interest payments.
The balance 50 percent short term loans are to be restructured by rescheduling loans and providing moratorium on principal and at the best possible terms of interest.
The heavily debt-laden State Electricity Boards (SEBs) have piled up losses of around Rs.190,000 crore at the end of fiscal 2010-2011. Among others, Tamil Nadu had losses of Rs.40,183 crore as of March 31, 2011, followed by Rajasthan (Rs.37,200 crore), Uttar Pradesh (Rs.35,211 crore), Madhya Pradesh (Rs.11,491 crore), Punjab (Rs.11.363 crore) and Haryana (Rs.6,505 crore).
“The restructuring/reschedulement of loan is to be accompanied by concrete and measurable action by the Discoms/States to improve the operational performance of the distribution utilities,” the official release added.
To look into the issues of Discoms and suggest a strategy for their financial turnaround, the Planning Commission constituted an Expert Group under B.K. Chaturvedi, Member, Planning Commission, which had recommended that 50 percent of the short term debt to be taken over by the respective states and the balance 50 percent be restructured by the banks.
A lack of investment and regular tariff revisions for electricity transmission and distribution have resulted in consistently high losses in the industry.
The scheme will remain open up to Dec 31, 2012, and will be available for all participating state-owned Discoms.
Power sector stocks such as BHEL, Tata Power, Power Finance Corp. and REC registered smart gains in the share market Monday on the hopes of restructuring of loans for state electricity boards.