Power sector gets a pleasant shock; govt to restructure

Updated: Tuesday, September 25, 2012, 8:53 [IST]

In a welcome move to uplift the inefficient power sector, the government has decided on a restructuring package for the state electricity boards, which are saddled with massive losses totalling nearly Rs 190,000 crores.

The following are the final details of the restructuring exercise:

a. 50 percent of the outstanding short term liabilities upto 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.

b. Takeover of liability by State Governments from Discoms in the next 2-5 years by way of special securities and repayment and interest payment to be done by State Governments till the date of takeover.

c. Restructuring the balance 50 percent Short Term Loan by rescheduling loans and providing moratorium on principal and the best possible terms for this restructuring to ensure viability of this effort.

d. 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.

e. For monitoring the progress of the turnaround plan, two committees at State and Central levels respectively are proposed to be formed.

f. Central Government will provide incentive by way of grant equal to the value of the additional energy saved by way of accelerated AT&C loss reduction beyond the loss trajectory specified under RAPDRP and capital reimbursement support of 25 percent of principal repayment by the State Governments on the liability taken over by the State Governments under the scheme.

The accumulated losses of the state power distribution companies (Discoms) are estimated to be about Rs 1.9 Lakh crore as on 31st March, 2011. In order to look into the issues of State Discoms and to suggest a strategy for the turnaround of the distribution sector, Planning Commission constituted an Expert Group under the chairmanship of Sh. B K Chaturvedi, Member (Energy), Planning Commission. The approved scheme is formulated based on the report of the Expert Group and deliberations in the PMO and Ministry of Finance.

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