The Union government's move to securitise the payments owed by the state electricity boards (SEBs) to National Thermal Power Corporation (NTPC) and Coal India Ltd (CIL) has run into rough weather as both the public sector undertakings (PSUs) have refused to bear the interest costs on the bond issues proposed to recover the dues.
The PSUs want the defaulting states to bear the costs.
The government mooted securitised power bonds in the Budget to recover a part of the Rs 10,000 crore owed by the SEBs. After the money was raised, the government planned to deduct the debt service payments from the respective state's share of the Central devolution.
The bonds, scheduled to debut in August, have now been delayed. The government is finalising the modalities on the interest costs. The dues were to be recovered by the PSUs in different tranches with the bonds having an average maturity of 3-4 years.
Officials said this was the only option available to the Centre to recover the money, failing which the SEBs would never have met their dues. "The public sector companies are not receiving any of the outstandings. By securitising, they get the present value of the funds upfront," they said.
The power and coal ministries, which are the respective administrative ministries of these PSUs, now want the interest payment also to be deducted from the Central transfers.
The officials said there was no rationale for the PSUs bearing the interest costs on the bonds as this money was already due to corporations from the states and this was the only method of recovering the dues.
The government was also considering the option of extending either SLR or tax-free status to the bonds. Either status would have implied a lower coupon rate, resulting in lesser revenue outgo. A tax-free status would have implied that the coupon rate would not exceed 10.5 per cent irrespective of the tenor.
The SLR route would have implied a coupon rate of around 11.5 per cent depending on the maturity profile.
A final decision, requiring Reserve Bank of India's approval, is expected shortly, the officials said.
