The government on Tuesday said it would soon draft a law to ensure errant state power distribution companies (discoms) stuck to the provisions of the financial restructuring package announced yesterday.
In 2001, a debt-restructuring package by the government for loss-making state electricity boards had failed to turn around the fortunes of discoms, owing to commercial losses and the lack of frequent revisions in rates. “We do not want the package to meet the same fate as the one-time settlement scheme of 2001,” Power Minister Veerappa Moily said. “Therefore, it is important to ensure distribution companies meet the conditions to avail of the restructuring package. For this, a model law, called the State Electricity Distribution Responsibility Bill, would be drafted. States would enact the legislation within 12 months.”
The new scheme is likely to be notified by the end of this week.
As on March 31, distribution companies had accumulated losses of Rs 2.46 lakh crore. In March, the short-term debt of seven states that account for 75 per cent of the debt liability of all distribution companies (Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Punjab, Haryana and Tamil Nadu) stood at Rs 1.2 lakh crore.
The recent bailout package for distribution companies comes with riders — annual rationalisation of rates, reducing aggregate technical and commercial losses, timely release of subsidy by state governments, regular metering of supply and bringing private participation in distribution.
Under the new scheme, which is optional for states, half the short-term outstanding liabilities would be taken over by state governments.
These would be converted into bonds and issued by distribution companies to participating lenders, backed by guarantees by the state government.
The remaining half would be restructured by providing a three-year moratorium on the principal, along with the best possible terms for repayment.
Pawan Agrawal, senior director at CRISIL Ratings, said, “This will lead to cumulative savings of Rs 6,000-7,000 crore in interests for distribution companies.”
The package, when availed of by distribution companies, is expected to gradually remove the huge gap between revenue realisation and the cost of supply for the companies.
