CRISIL on Monday said banks might take a hit of Rs 4,500 crore on net present value (NPV) of loans given to the state electricity boards (SEBs) on account of debt that would get converted into state government bonds.
The Cabinet on on Monday decided to clear the debt restructuring proposal, which Pawan Agrawal, senior director, CRISIL said was “nothing short of a lifeline for discoms”.
“In the short term, this will ensure the resumption of much-needed flow of credit for discoms, and as a result, provide a boost to the entire supply chain of equipment and power suppliers as well as lenders to the sectors. In addition, there will be clear structural positives that should enhance the longer-term viability of the distribution sector, improving their profitability and restoring lenders’ confidence in them,” said Agrawal.
According to Crisil, the restructuring will lead to cumulative savings of Rs 6,000 and 7,000 crore in interests for the discoms.”
The rating agency added, “The desired impact of this restructuring will not be realised unless a broad-based political consensus is achieved to implement the much-needed tariff hikes, a timely and adequate financial support is provided by the state governments, and the discipline of the regulatory process and disclosures is enhanced.”