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Discom aid package linked to overhaul

Power Minister Veerappa Moily on Tuesday made it clear that state power distribution firms will have to set their house in order and the Centre’s debt restructuring package to bail them out would be strictly performance-linked.

business Updated: Sep 25, 2012 22:37 IST
HT Correspondent

Power Minister Veerappa Moily on Tuesday made it clear that state power distribution firms will have to set their house in order and the Centre’s debt restructuring package to bail them out would be strictly performance-linked.

“The package is performance-linked and states discoms need to come up with a concrete plan to improve their health,” he said.

“The ministry of power will bring out a draft State Electricity Distribution Responsibility bill after due inter-ministerial consultation within a period of 12 months from the approval of the scheme,” Moily said at a news conference.

States will enact the legislation within 12 months from the date of circulation of model legislation by the ministry of power to mandate compliance of the provisions of the financial restructuring package, he said.

The cabinet committee on economic affairs approved the scheme for financial restructuring of state distribution companies (discoms) on Monday.

“The accumulated losses of state discoms are estimated at Rs. 1.9 lakh crore as on March 31, 2011 and R2.5 lakh crore as on March 31, 2012,” he said.

The scheme contains various measures required to be taken by state discoms and state governments for achieving the financial turnaround of the discoms by restructuring debt. Under the scheme, 50% of the short-term outstanding liabilities would be taken over by state governments.

This shall be first converted into bonds and then issued by discoms to participating lenders, duly backed by the state government’s guarantee.

The balance would be restru-ctured by providing a 3-year moratorium on principal and best possible repayment terms.

The approved scheme is not mandatory for states.

So far, only seven states — Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Punjab, Haryana and Tamil Nadu — have come on board, Moily said.

The minister also suggested that tariff rationalisation should take place annually on the part of the states.

With this scheme, the government hopes to improve the financial health of the distribution utilities to enable them to procure more electricity for meeting their growing demands.