Discom mess: States told to share burden of banks

By: | Published: September 29, 2015 12:24 AM

The problem is essentially of the discoms, who despite an increase in generation and supply, are unable to bridge the last-mile gap, FM Jaitley said

The Reserve Bank of India (RBI) has written to states with stressed power distribution companies telling them to levy appropriate charges from customers as the banking system would not continue to support them, finance minister Arun Jaitley said on Monday.

Speaking at the Indian Banks’ Association annual general meeting here, he said, “The Reserve Bank of India (RBI) has already put those state government (discoms) on notice that if they don’t charge adequately and don’t make the users pay for the power that is supplied to them, the banking system at its own peril cannot continue to support them.”

He said that in the power sector, the problem is essentially of the discoms, who despite an increase in power generation and supply, are unable to bridge the last-mile gap. “Our capacities in power generation has hugely improved, we were last year surplus at power, our distribution network through the national grids has improved. The final access or the last mile access is by the state discoms,” he explained.

Jaitley said that the discoms’ reforms have been carried out in very few states. “There are four states which are in dire distress as far as their discoms are concerned and four others where the situation is reasonably challenging,” he said, adding that the entire advantage of increased power generation, multiple sources of power generation, a grid across the country, all gets defeated by a narrow last mile where reforms have not been carried out.

He said that the power ministry is in active discussion with these states and most of them have responded quite positively. “A meeting was held at the level of the prime minister himself and some important changes and reforms in relation to these states where the discoms are distressed are being worked out,” he said.

Jaitley said that power ministry is in the final stages giving effect to its discussions with each one of these states which would have to enter into a discussion and probably an agreement with the ministry and it’s only then the kind of relief being worked out be available to them.

Through the Financial Restructuring Package (FRP), discoms’ short-term liabilities amounting to R51,200 crore were restructured by the lenders in 2012 with the comfort of state government guarantees. Under the FRP, 50% of the accumulated debt of the discoms till March 2012 were converted into bonds. These bonds were be issued by the distribution companies to the participating lenders, backed by state government guarantees. The balance 50% loans were restructured by providing moratorium on principal and best possible terms for repayments.

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