Gridco argued that the crisis had mainly arisen due to inherited liabilities and transitional problems for financial restructuring which would enable it to achieve turn around by 2004, the sources said.

OERC conducted a preliminary hearing on the matteron thursday, after which it directed the distribution companies (distcos) to file their replies by November 18, and set the next date of hearing for November 23.

It also decided to implead the state government and thegenerating companies as parties in this case, the sources said.

Presenting GRIDCO's case for expeditious clearance, itsDirector (Finance) and Managing Director incharge, R.Mishra made a strong case for the bulk supply licensee stating that the company had been compelled by cash crunch arising out of inherited liabilities and transitional problems.

Gridco's argument was that the FRP was mainly a proposal for deferment of current liabilities into long-term loan and refinancing of other long-term loans through tax free bonds.

The sources said that Gridco had proposed that a long term loan of Rs 800 crore payable to Power Finance Corporation (PFC) and Rural Electrification Corporatifon (REC) would be converted to tax-free bonds with a coupon rate of 10.5 per cent. These would be issued in the form of power bonds in the market with the approval of the Central government and counter guarantee by the state government.

Similarly, the power purchase dues of Rs 600 crore owed to National Thermal Power Corporation (NTPC) would be securitised by issue of tax-free bonds at the rate of 10.5 per cent with a moratorium of five years on repayment and clearance in the next five years. Dues of state generators to the tune of Rs 560 crore would also be squared up by issuing Rs 360 crore worth of tax free bonds with state government guarantee and cash support of Rs 200 crore.

Gridco had requested the generating companies to exempt it from delayed surcharge payment.

The company had also negotiated with the World Bank for a soft loan of Rs 400 crore out of which Rs 200 crore would be paid to state generators and the balance of Rs 200 crore would be utilised to meet anticipated revenue deficit till the company achieved a turn around. As per Gridco's calculations, the state government would cough back Rs 340 crore into Gridco over the next five years at the rate of Rs 70 crore per annum in the form of revenue support.

The company has sought a commitment from the company to reduce transmission and distribution (T/D) Losses to 20.6 per cent by 2005 at the rate of five per cent per annum for the first three years and 2.5 per cent thereafter.

(PTI)