The power ministry is considering financial bailout for distribution companies that are grappling with huge losses.
The precarious financials of power distribution companies (discoms) has raised concerns of possible default in the banking system.
When asked whether the government is looking at financial bailout for discoms, power minister Sushil Kumar Shinde on Thursday said, “It is also being considered”.
He also expressed the optimism that financial health of discoms would improve gradually.
In December last year, the Shunglu Committee on Financial Position of Distribution Utilities came up with slew of suggestions, including setting of a special purpose vehicle to absorb losses of discoms.
The net loss of 15 discoms — which account for over 90% of country’s power consumption — after subsidies was R27,000 crore for the year ended March 31, 2010, according to the panel report.
The poor health of discoms is mainly attributed to low-tariff regime as well as high Aggregate Technical & Commercial losses.
Recently, the Appellate Tribunal of Electricity (ATE) asked state regulators to ensure time and cost-reflective tariff determination.
Earlier this week, rating agency ICRA pegged the losses of discoms — before accounting for government subsidy — in the country at Rs 80,000 crore for the current financial year.
Estimates were based on a study of power distribution companies (discoms) functioning in 11 states.