Congress-ruled Karnataka and Andhra Pradesh, whose power distribution companies are currently ineligible for the Centre-aided debt recast scheme, are close to clinching a deal with the Centre, which would enable them to access the package.
Thanks to some accounting jugglery, these financially stressed discoms don’t, for the record, make losses right now. Accumulated losses are a prerequisite for a discom to be eligible for the debt recast.
Sources said the Centre would now ask the RBI to relax the eligibility conditions to enable these states to access the package, under which loans worth R1.9 lakh crore of discoms are being recast.
Currently, the Karnataka and Andhra discoms don’t show their short-term loans and other liabilities on balance sheets and, instead, book these payables as ?irrecoverable trade receivables? to hide accumulated losses. Since there is no loss on their balance sheets, these discoms cannot participate in the debt recast scheme.
However, their finances are in a shambles due to accumulated losses and respective state governments must inject funds if the discoms have to stay afloat.
In contrast with clean balance sheets presented by these discoms, the VK Shunglu-led committee, which was set up by the Centre to study financial health of discoms in various states, has estimated losses of power distribution sector in Karanataka and Andhra Pradesh at R 17,709 crore and R15,375 crore as on March 2010.
Sources said the Accountant General (AG) of Andhra Pradesh has noted in its audit report on state discoms: ?Had these trade receivables been properly reflected in the discoms’ accounts, it would have reflected in huge accumulated losses.? Similarly, Karnataka discoms too faced flak from the state AG.
Reluctant to provide money from their own budgets to the discoms, the states have, instead, approached the Centre for relaxation of eligibility criteria so that their discoms could avail the debt recast facility. That would, in turn, restore discoms’ creditworthiness and clear the hurdles for them to seek new loans from banks and financial institutions.
Andhra Pradesh discoms even approached the state AG for permission to restate their accounts to reflect their actual losses. However, the AG denied permission on the ground that accounts had already been adopted by the shareholders at the AGM.
The RBI tightened norms for lending to discoms in 2011 after it came to light that discoms were using bank loans to finance their operational losses resulting from delay in revision of electricity tariffs. Later, the Centre approved a debt recast package in September 2012 to help improve discoms’ cash flows. Discoms from states like Tamil Nadu, UP, Rajasthan and Haryana are in the process of getting their loans recast with banks and financial institutions.
Power min pushes draft plan for pooling domestic & imported gas
The power ministry has circulated a draft Cabinet proposal on pooling of domestic gas with imported LNG ( liquified natural gas) to improve fuel availability for country’s 24,000 mw gas-based generation capacity, of which 8,000 mw of upcoming capacity is unable to start operations due to non-availability of domestic gas despite allocations.
As per the pooling mechanism proposed by the ministry, the pooled gas is estimated at $ 11.42-9.41 per mmbtu, depending how much domestic gas is available for pooling. Upcoming plants will be able to run at 27-40%% plant loan factor.