Power minister Jyotiraditya Scindia will meet with bankers on February 8, when the government?s proposed restructuring package for the ailing discoms will be discussed, said the general manager of a public sector bank who will be attending the meeting.
?We will discuss a range of issues surrounding the power sector and funding for power companies. One of the key areas of discussion will be the restructuring of the state electricity boards (SEBs),? said the banker.
The meeting with the bankers will follow Scindia?s meeting with the state energy ministers scheduled on February 5. This will be held to win the broad support of the different states for the central government?s restructuring package plan to bailout the discoms.
In September 2012, the government approved the restructuring of Rs 1.9 lakh crore debt (upto March 31, 2011) of the discoms. A large portion of these loans are from the SEB?s in Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh. The scheme envisages that the respective state governments take over 50% of the short-term liabilities. These liabilities will be converted into bonds backed by the state government?s guarantee. The remaining 50% of loans would be restructured by providing moratorium on principle and easier repayment terms.
As on September 2012, some of banks with large exposures to SEB?s included Indian Bank in which SEB?s accounted for 7.9% of the loan book, 7.6% for Central Bank, 7.6% for Dena Bank, 6.2% for Andhra Bank and 5.1% for Canara Bank. SBI has a relative small exposure to SEB?s at 0.3%. The banker said lenders will use the opportunity to raise some concerns they have regarding the restructuring package. Firstly, some bankers are worried that the rate of interest on the state government bonds will be linked to G-Sec + rates, lower than the interest rates at which the loans were given to the SEBs. This would hit the the banks? bottom lines. Also some bankers are insisting that the bonds be given SLR status as it is easier to raise money against SLR bonds. Bankers however acknolwledge that the recent tariff hikes along with operational efficiencies and implementation of the restructuring package could help in long-term viability of discoms.
On Wednesday, the Reserve Bank of India (RBI) allayed one other concern that was bothering the bankers by clarifying that SEBs that have already undergone one round of restructuring will not be treated as NPA when the new package comes into fruition.
