"Bailout package" for state electricity distribution boards

Discussion in 'Economy & Infrastructure' started by ejazr, Jul 18, 2012.

  1. ejazr

    ejazr Stars and Ambassadors Stars and Ambassadors

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    This could be an important achivement in resolving the power crisis if this plan is put into action. The bailout package combines reforms in the pricing system.

    Terms set for power bailout
    New Delhi, July 17: State electricity boards (SEBs) need to hike tariff to avail themselves of the central package to restructure debt, power secretary P. Uma Shankar said today. The cabinet will soon take up the proposal to restructure debts of around Rs 2 lakh crore of all the SEBs.

    According to the proposal, about 50 per cent of the debt will be converted into bonds that will be issued by the state governments. The remaining liabilities will be restructured. Discoms will be offered a three-year moratorium during which they will not have to repay the principal loan amount.

    The Centre wants banks and state governments to share the bailout burden. Banks will restructure loans for 50 per cent of the debt and will continue to lend to the SEBs after the recast. The banks will extend the repayment tenure and offer moratorium on interest.

    “The way the current situation (can) be handled is through some combination of tariff increase and serious efforts to reduce AT&C (aggregate technical and commercial) losses,” Planning Commission deputy chairman Montek Singh Ahluwalia said at the conference of state power ministers here today.

    “Many states, which have not adjusted the tariff for 10 years in a row ... (may) need to adjust it by 60 per cent,” he said.

    The government had announced a similar bailout in 2001-02. Over these 10 years, tariffs were not hiked in tandem with the rising cost of power, pushing the SEBs and the distribution firms to the brink of becoming sick.

    The Tamil Nadu Electricity Board, which has an accumulated loss Rs 50,000 crore, is reeling under a huge debt burden. The distribution companies in Uttar Pradesh, Rajasthan, Madhya Pradesh and Tamil Nadu alone account for around 75 per cent of total losses in the country.

    Uma Shankar said the power ministry was pushing for a minimum supply level of 80 per cent from the first year onwards for the signing of fuel supply agreements between Coal India and the power producers.
     
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  3. sob

    sob Moderator Moderator

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    this is indeed a positive step for defusing a potentially explosive situation.

    But care must be taken that due to populist moves the SEBs do not end up in a similar situation 5-6 years down the line. There should be an independent Electricity regulator who decides the rates, independent of the Govt.
     
  4. Daredevil

    Daredevil On Vacation! Administrator

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    Its a positive step indeed. It will force the hand of the State governments to shape up or ship out. Either restructure and increase the tariff or subsidize the power by diverting other development funds.
     
    sob likes this.
  5. Predator

    Predator Regular Member

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    typical band aid solution

    how about a permanent solution, why not reduce T&D losses and recover unpaid bills.

    bailout means innocent taxpayers will pay for their inefficient management while the losses continues.
     
  6. lcatejas

    lcatejas Regular Member

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    Very soon there will be a news .. bailout packages for sheela dixit....:laugh:
     
  7. sob

    sob Moderator Moderator

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    The SEBs in their present form are too big to work efficiently. There are two models which can be followed

    1st is the Delhi way, where you privatise the distribution and within a short time there is a big impact and the other is the Haryana way where tje SEB has been split up into 3. With one power generating and 2 for distribution. It has had some impact but still a long way to go.
     

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