Opinion Discom debt recast: Consensus elusive
Efforts at getting the states on board to ratify the Centres ambitious Rs 1.9-lakh-crore debt restructuring scheme for the power distribution sector is proving to be an uphill task
Efforts at getting the states on board to ratify the Centres ambitious Rs 1.9-lakh-crore debt restructuring scheme for the power distribution sector is proving to be an uphill task. Even as some of the bigger states such as Uttar Pradesh,Tamil Nadu,Andhra Pradesh,Karnataka and Rajasthan have conveyed their willingness to ratify the package,the list of those likely to hold out is much longer.
Punjab and Madhya Pradesh,which figure among the seven major states that cumulatively account for over 70 per cent of the Rs 2.5 lakh crore distribution sector losses accumulated over the past decade,seem steadfast in their decision to not participate in the scheme. The smaller states,with Kerala being the only exception,are either not planning to come on board or are still undecided,despite the fact that the timeline for states to opt for the scheme has already been extended once by three months and is slated to get over by March 31.
States such as Madhya Pradesh have categorically stated that they do not need the scheme at all. Others such as Bihar and Jharkhand might not qualify as they are yet to unbundle their state electricity boards. Punjab,along with a number of states,has raised some reservations with the Centres package.
For one,they think that it will be difficult for them to stick to the Fiscal Responsibility and Budget Management (FRBM) targets if they go ahead with the scheme. Additionally,they want the incentives that the Centre has promised 25 per cent of the principal repayment of the state once they take the entire 50 per cent of the burden of the discom to be handed over right upfront and not at the end of the cycle. A broad consensus,as of now,seems elusive.
To be part of the scheme,states are expected to take over 50 per cent of the outstanding short-term liabilities (STL) of the discoms as of March 31,2012. This is to be first converted into bonds to be issued to participating lenders,duly backed by state guarantees. The state government will take over the liability during next 2-5 years by issuing special securities in favour of participating lenders in a phased manner,keeping in view the fiscal space available till the entire loan is taken over by the government. Besides,states would have to provide full support to the discoms for repayment of interest and principal for this portion. Also,the state government would need to ensure that the special securities is within the targets prescribed in their respective FRBM Acts.
Anil is a Senior Editor based in New Delhi.
anil.s@expressindia.com
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