Just hiking tariffs will cause national unrest

Written by fe Bureau | New Delhi | Updated: Jul 4 2014, 08:18am hrs
GoyalPower minister says discom debt recast plan isn?t working
Although half a dozen state discoms have agreed to a restructuring of their short-term liabilities with a promise to reduce losses and raise tariffs, Union minister of state for power and coal Piyush Goyal on Thursday called the financial restructuring plan (FRP) a non-starter. Goyal said his ministry was working to improvise on the scheme but added that focusing single-mindedly on raising tariffs would cause unrest in the whole nation.

For Uttar Pradesh, Rajasthan, Tamil Nadu and Haryana alone, the short-term liabilities are estimated at Rs 1.32 lakh crore, roughly a fourth of total bank exposure to the power sector. Banks are estimated to have provided around Rs 30,000 crore in the last one year as working capital to these four states.

Speaking at the Indian Express Groups Idea Exchange programme, Goyal also indicated a decision on allowing the private sector to mine coal commercially was unlikely to be taken in a hurry. We will have to allow competition in a calibrated fashion and Im sure we will see more participation in a robust framework, he said, adding, I dont belief that the only reform in the coal sector involves privatisation or breaking up Coal India.

While not expressing a view on whether gas prices should be hiked, he asserted, worryingly for banks and promoters, that the government had not given any assurance to any gas-based power plant that it would supply the fuel at any particular price. So the obligation is not on the central government, it is a business decision on the part of gencos and gas producers, the minister said, while adding that he was willing to help arrive at a solution.

Speaking of the FRP, Goyal remarked that it had been a failure right from the beginning since it did little except convert 50% of the short-term borrowings of the discoms from a loan to a long-term bond.

A solution to the losses and debt of discoms, he said would be implemented in a time-bound manner though the focus need not necessarily be solely on raising tariffs. If we focus on efficiencies and address the current problem, it will help me unlock the earlier problems, he said.

Goyal said the government was looking to states for proposals that the Centre could support such as setting up separate feeder lines, ensuring that power was paid for and reducing non-core assets to take care of liabilities. We like what Maharashtra has done to control power theft. The states need to come forward, theres no one-size-fits-all solution, he said.

On opening up the coal sector for commercial mining by the private sector, the minister noted that his government had started auctions for users. As for commercial mining by the private sector, we will have to wait and see how it will pan out. The reality is we are importing coal today and we need to quickly replace that with domestic coal and every avenue that helps us reduce dependence on imported coal should be considered, he said. However, he said caution should be exercised while opening up sectors such as power and fertiliser that impacted the common man.

Responding to a query on several public sector corporations being headless, Goyal said he hoped to rope in professionals from the private sector. We hope they will offer themselves even though we know the government cant pay salaries like those in the private sector, he said.