Column : Been there, done what?
Interestingly, there are clear provisions in the Act and SERC regulations to tackle these situations. Almost all SERCs have empowered themselves to undertake suo motu tariff revision in case the discom does not file a tariff revision petition. Section 65 of the Electricity Act empowers SERCs to demand advance payment of subsidies from state governments, but no SERC has made use of this provision. Under multi-year tariff regulations, almost all SERCs have provisions for formulating and reviewing power procurement plans, making it possible to avoid high-cost short-term power purchases. Thus, failure on part of institutions responsible for ensuring implementation of legal provisions is mainly responsible for the current crisis. However, the proposed bailout package does not address this issue.
Dressing up debt
The FRP requires state governments to take over 50% of the outstanding liabilities of discoms by converting this debt into bonds and discoms are to service the remaining part. If a discom defaults, the state government ensures debt servicing. Banks pay for their folly by simply foregoing penal interest and principal payment for three years, and have to contend with a restructured loan. Discoms cannot borrow from banks to finance present short-term losses and an alternate arrangement is proposed where three-year support on a diminishing scale will be given on a case-by-case basis. This alternate arrangement is, in fact, a bailout within a bailout. The
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