Govt clears bailout package for debt-ridden discomshttps://indianexpress.com/article/business/business-others/govt-clears-bailout-package-for-debt-ridden-discoms/

Govt clears bailout package for debt-ridden discoms

At present, outstanding loans of state distribution utilities stand at 5 lakh crore.

BJP, BJP govt, Discom issue, BJP Discom issue, debt ridden discoms, Power tariff, Power thefts, SEB,
Piyush Goyal said most SEBs in the country would stop making losses by FY18, while some of the most stressed ones such as Rajasthan, Tamil Nadu and UP would take another year or so to turn around.

The Centre on Thursday handed out a life-line for the loss-laden power distribution sector, the third such bailout package over the last 13 years for the downstream-end of the electricity sector that has been reeling on account of the politics of free power, repressed tariffs and power thefts. In contrast to the previous two attempts to revive the utilities, the latest package by the government attempts to overtly shift the cost of non-compliance of reforms measures to the state governments.

According to the plan cleared by the cabinet, states will have to take over 75 per cent of the SEBs’ loans as of September 30, 2015, by FY17-end, and 50 per cent by the end of March 2016 itself. The cost of this takeover will not be factored in for the states’ Fiscal Responsibility and Budget Management (FRBM) limits for the current fiscal and the next. The states will have the facility of a concessional interest rate of about 9 per cent in servicing the loans, compared with the present 13-14 per cent interest rate on SEBs’ outstanding debt. The states will issue bonds at 0.5 per cent above the G-Secs.

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On their part, having improved their balance sheets, SEBs will sell the rest of their debt as bonds backed by state guarantee. Once 50 per cent of their outstanding loans are taken off, the states’ interest burden will straight away be halved. The outstanding loans of state distribution utilities stand at Rs 5 lakh crore, with at least three of them making losses of over Rs 10,000 crore annually.

CaptureAnnouncing the Ujwal Discom Assurance Yojana (UDAY), power minister Piyush Goyal said most SEBs in the country would stop making losses by FY18, while some of the most stressed ones such as Rajasthan, Tamil Nadu and UP would take another year or so to turn around.

The SEBs will have to take steps to reduce their AT&C losses from the current national average of 22 per cent to 15 per cent helped by the Centre’s Integrated Power Development Scheme and the Deen Dayal Upadhyay Gram Jyoti Yojana. To ensure that the states do not digress from the road map, the losses, if any, of the SEBs will have to be taken over by the states from FY17 without any relief on the FRBM front; 5 per cent of the preceding year’s losses in FY17, 10 per cent in FY18, 25 per cent in FY19 and 50 per cent in FY20.