Aftab Ahmed

Mumbai, July 9

Banks have agreed to restructure short-term liabilities (STLs) worth R1 lakh crore of four state electricity boards (SEBs) so far and the state discoms are in the process of issuing bonds as agreed under the terms of the financial restructuring plan (FRP).

The restructuring scheme for SEBs of R1.9 lakh crore was approved by the centre last year. Around 70% of these losses are estimated to have been contributed by SEBs in six states ? Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh.

Of the six major states, four have been approved by the banks. Punjab and Madhya Pradesh have not agreed to join the restructuring programme, according to sources in banking. Punjab has a short-term liabilities (STL) of R12,000 crore and MP has STL of over R1,100 crore.

Rajasthan electricity board is the most debt laden among all states in the country and banks have approved to restructure about R38,000 crore of STLs of the state, followed by UP where R32,000 crore will be restructured. The banks approved restructuring worth R15,000 crore for Haryana and R12,000 crore for Tamil Nadu.

The FRP envisages 50% of STLs be rescheduled by the lenders and serviced by the discoms, with a moratorium of three years on principal repayments. That means the SEB would continue to service the interest on the loans. The remaining STLs are to be taken over by the state governments and converted into bonds guaranteed by them.

Tamil Nadu was the first state to issue bonds worth R6,144 crore in the first phase, last month. Bankers said Rajasthan, UP and Haryana will start issuing bonds in next few weeks.

The bonds will carry a premium of 75 bps over benchmark G-sec for those notes guaranteed by the state, while those not guaranteed by the state will carry a premium of 100 bps over comparable G-sec. All the packages approved so far have guarantees from the state government and bankers said they will not approve any package unless it has a backing from the states. Bankers expect to take a hit of upto 3% of the total exposure due to restructuring plan.

Meanwhile, the government is still to decide on discom of states like Jharkhand that has not yet unbundled its power operations, and Kerela, whose unbundling model of the power operations has not been approved by the government.