Bihar, AP and Jharkhand up for Rs 10,000-crore discom recast

Written by Aftab Ahmed | Noor Mohammad | Noor Mohammad | New Delhi | Updated: Jan 30 2014, 10:07am hrs
Lenders are expected to ratify a financial restructuring plan to recast short-term liabilities (STLs) worth about Rs 10,000 crore of Andhra Pradesh, Jharkhand and Bihar before February 15, according to bankers involved in the deal.

Andhra Pradesh, Jharkhand and Bihar are now eligible for assistance under the FRP after they completed the unbundling of their assets, essentially separating their generation and distribution arms.

Banks will be restructuring STL of Rs 2,869 crore for Bihar, Rs 4,000 crore for Jharkhand and Rs 3,000 crore for Andhra Pradesh. Canara Bank is the lead banker for Bihar and Andhra Pradesh, while Bank of India is leading the consortium for Jharkhand. This will be the second round of restructuring after lenders restructured close to 1 lakh crore worth of STLs of four states Rajasthan, Uttar Pradesh, Tamil Nadu and Haryana who had the most amount of accumulated losses among the states.

According to the FRP scheme, operational losses of the discoms will be financed by the banks to the extent of 100% in 2012-13, 75% in 2013-14 and 50% in 2014-15.

According to the calculation done by FE. Jharkhand's revenue gap swelled up from 79 paise per unit in FY12 to Rs 1.83 in FY13, while Bihar discoms saw their revenue gap jumping from Rs 1.39/unit in FY12 to Rs 1.61 in FY14. Meanwhile, Andhra Pradesh's discom revenue gap narrowed from Rs 1.25/unit in FY12 to Rs 1.15/unit in FY14 as they hiked power prices twice by 18% and 23% since FY12.

The FRP terms also mandate discoms to raise tariffs every year and if they do not do so after they have been put under the FRP scheme, then the respective states would have to compensate for the losses for that particular year.

The package for these discoms should be approved in the next 15-20 days. The terms of the agreement will remain more or less the same as it was for those discoms that have recently been approved, according to a Canara Bank senior executive. However, Haryana government's move to roll back its 13% power tariff hikes announced for FY13 has made the bankers conscious and are now making sure that the states understand the liability they have to undertake if they do not raise tariff prices.

"If the states do not stick to the terms and conditions, the Centre will have to either make them behave or will have to bear the losses," another top executive of a public sector bank said.

Under the Center-assisted plan to restructure STLs of about Rs 1.9 lakh crore, which was approved by the government last year, 50% of the accumulated debt of the discoms till March 2012 can be converted into bonds.

These bonds will be issued by the discoms to the participating lenders, backed by state government guarantees. The remaining 50% will be restructured with banks providing moratorium on the principal and best-possible terms for repayments.

The support under the scheme is available for all participating state-owned discoms on fulfilling short-term mandatory conditions.

The accumulated losses of state power distribution companies are estimated to be about Rs 1.9 lakh crore as on March 31, 2011 and Rs 2.46 lakh crore as on March 31, 2012.