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.
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.
