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Home News Power Sector News FinMin, RBI rule out refinancing bad loans of State power discoms

FinMin, RBI rule out refinancing bad loans of State power discoms

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PMThe Finance Ministry and the Reserve Bank of India have turned down the Power Ministry's proposal seeking refinance of Rs 1.95 lakh crore accumulated losses incurred by State electricity distribution companies (discoms). The losses include loan repayments, pending subsidy receipts and payment to power producers, among others. The high utility losses are because of low tariff hikes, rising burden of fuel prices and non-receipt and delayed subsidy payment from States. The aggregate annual loss of the utilities before subsidy increased at 33 per cent annually.

"The Finance Ministry and the RBI clearly said that refinancing of such debt is not viable as it will increase non-performing assets (NPAs) of banks and other financers. In the current economic scenario, banks are not in a position to carry additional NPA burden," a Government official told Business Line. Meanwhile, the Power Ministry, along with Planning Commission and RBI, is brainstorming over several options to give these discoms a new lease of life. Among the options being discussed are refinancing of loans, issue of bonds by discoms to cover up to 50 per cent of debt and the possibility of State governments sharing a part of the burden.

"We are reviewing various proposals, but nothing has been finalised yet," the Power Secretary, Mr P. Uma Shankar, said.

The Prime Minister, Dr Manmohan Singh, recently held a review meeting and asked the Power Minister, Mr Sushilkumar Shinde, to chart out a bailout package for discoms at the earliest to prevent power cuts across the country.

The State electricity distribution companies, heavily in debt, are unable to buy additional electricity to meet peak summer demand, which is leading to long hours of power cuts across the country.

"The total losses have touched nearly Rs 1.95 lakh crore. Rajasthan, Uttar Pradesh, Punjab, Haryana, Tamil Nadu and Andhra Pradesh share most of the loan burden," the official said.

Experts, however, see a tariff hike as a possible measure. "The key reform would be to devise a mechanism to enable an automatic pass through of fuel price increases to power tariffs," said Mr Razak Khatri, Director of Crisil Infrastructure Advisory.

Fuel costs accounted for about 48 per cent of the total purchase cost growth for power utilities over the last six years. Over the next five years, Crisil Infrastructure Advisory estimates that fuel costs will account for about 54 per cent of the total power purchase cost growth for the utilities.

Source- Hindu


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