Financial restructuring packages (FRPs) for most state electricity boards (SEBs) that have opted for them are likely to be approved by the end of this month. Punjab National Bank (PNB), the lead bank for the restructuring of the Uttar Pradesh SEB, is meeting the 20-member consortium on Thursday to thrash out the final details of the package which will restructure R31,680 crore in short-term liabilities (STLs). The package is expected to be approved by mid June.
Meanwhile, 11 banks, led by Oriental Bank of Commerce (OBC), will meet on Monday to approve Haryana SEB?s R14,000-crore restructuring plan. The package for Haryana is also likely to be approved by June 15, bankers said. Other SEBs, including those of Madhya Pradesh and Andhra Pradesh, may need to take annual tariff hikes of 11% and 5%, respectively, as part of their restructuring packages. Bankers say that the restructuring of the debt of these two SEBs too will be approved by the end of the month.
SL Bansal, CMD of OBC, told FE that the SEB restructuring was moving at a fast pace. ?All the plans will be approved by the end of this month though implementing them may take a little time,? Bansal said. Bankers said they are looking closely at tariff hike plans of SEBs and the commitment of state governments to clear subsidies to SEBs on time as part of their final negotiations.
Ahead of the consortium meeting on Thursday, the UP discom has submitted a tariff hike plan for the next eight years. As part of this, tariff hikes are being largely evenly spread out over the years, starting with a 9% hike in 2014, a 10.38% hike in 2015 and a another 8.36% hike in 2016. Uttar Pradesh has already raised power tariffs by over 30% from this month for the first time in four years.
The restructuring package of R1.9 lakh crore has been approved by the central government. Around 70% of these losses are estimated to be contributed by SEBs in six states ? Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh.
Last month, the Rajasthan SEB?s FRP for R38,000 crore of STLs was approved by a consortium of bankers led by Bank of Baroda, Punjab National Bank and Central Bank of India. Rajasthan agreed to take annual tariff hikes of 23%.
Tamil Nadu?s SEB package of R12,000 crore was the first to be approved by a consortium of 17 bankers in March. The SEB agreed to a 26% tariff hike every year for the next three years to achieve break-even.
The FRP envisages that 50% of the SEBs? STLs be rescheduled by the lenders and serviced by the discoms, with a moratorium of three years on principal repayments. That means the SEB will 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.
Among the banks, Canara Bank has the highest exposure to SEBs of over R22,000 crore, followed by Central Bank with an estimated Rs 14,000 crore in exposure. Union Bank and Allahabad Bank also have considerable exposure pegged at Rs 12,000 crore and Rs 9,000 crore, respectively. Punjab National Bank carries Rs 7,200 crore in SEB debt on its books. Once the restructuring of SEB debt is complete, banks will lose an estimated 1-3% on the total loan exposure to SEBs.
