``The proposal for creating an SPV to clear the dues of public sector undertakings has already been made and is with the finance ministry,'' power secretary V K Pandit said on Wednesday.

Speaking at a seminar organised by the PHD Chamber of Commerce and Industry Pandit said ICICI has prepared a securitisation plan for the dues through an SPV which would issue tax-free bonds or government-guauranteed bonds to public sector companies.

``The rate of interest charged on these bonds will be about 13 per cent as against 18 per cent interest currently paid by SEBs to public sector undertakings,''he said.

Pandit said this would help reduce the burden of interest payment of SEBs and state governments and also clear the outstandings of the public sector power utilities.

While the dues ofthe National Thermal Power Corporation (NTPC) from various SEBs stands at over Rs 10,000 crore, the dues of National Hydro Power Corporation (NHPC) are estimated to be Rs 1584.39 crore and Power Grid Corporation has overdues of Rs 756 crore. NTPC and Power Grid are facing problems in making fresh investments and expand their operations on account of the huge arrears from the SEBs.

The move to create an SPV will help these companies to clear off their outstandings soon and help them make more aggressive investment decisions, Pandit said.

Though the government was taking measures to improve the power situation in the country, the financial sickness of the SEBs was proving to be a constraint in the development of the sector, he said. Pandit said it was heartening to note that most of the states had agreed to take up the reforms process to improve the financial health of the SEBs. About 14 states have agreed to set up state electricity regulatory commissions (SERCs).

The mega power policy stipulates thatstates which set up SERCs and which take steps in the area of privatisation in towns with population of more than 10 lakh will be eligible for these projects.