Six states accounting for close to 70% of total accumulated losses of state distribution entities have agreed to participate in the Centre?s R1.9 lakh crore debt restructuring plan that envisages to restore the financial heath of the utilities. At a review meeting on the package convened by Union power secretary P Uma Shankar, chief secretaries of Tamil Nadu, Andhra Pradesh, Rajasthan, Punjab, Haryana and Uttar Pradesh expressed their willingness to be part of the scheme and gave details on the progress made on the issue so far.
State government have to come with a financial restructuring plan that would have to be approved by banks before the centre?s debt restructuring scheme could be operationalised. Under the terms of the scheme, states have to come comply with all formalities before december 31, 2012 to get the benefit. ?We had discussions to understand what is their (states?) preparedness to implement the debt recast plan. All the six states are willing to be part of the scheme. Their preparations are at various stages,? Union power secretary Shankar told FE. This was the first review meeting held by the ministry in this regard. ?I am satisfied with the progress,? Uma Shankar added.
The Union cabinet recently approved the debt recast proposal which can be availed by states against commitment to implement key power sector reforms. States willing to avail the facility have to submit their financial restructuring plan by the end of this year after securing approval from agencies like state finance department, concerned electricity regulator and bankers. Though not invited for today?s meeting, Jharkhand too has expressed interest recently to avail the debt recast facility. As quid pro quo for the Central assistance, states are required to undertake critical reforms like bridging the gap between expenditure and revenue through timely and adequate tariff revision, separation of rural feeders and advance payment towards reimbursement of subsidy for agriculture sector electricity consumers to ensure long-term financial viability of their power distribution companies.
Besides, state governments are required to take over half of the outstanding loans of their discoms, which will be first converted into bonds to be issued by discoms (under state government guarantee) for subscription by lenders. State governments will take over the liability over the next two to five years by issuing special securities in favour of lenders. That is meant to help state governments avoid the possibility of breaching their fiscal targets. The state government will also be responsible for repayment of the balance debt by the discom. Monitoring committees are proposed to be set up at both state and central level to ensure strict compliance by states with conditions set for availing the debt recast facility.
While the state-level monitoring panels will be headed by the chief secretary of the state concerned , its central counterpart will be led by member (power), Planning Commission.
