Power Min's FRP breather for Jharkhand, Bihar, Karnataka

The Power Ministry is likely to give the state electricity boards of Jharkhand, Bihar and Karnataka a breather by allowing them to convert their outstanding loans, till March 2013, into bonds as part of an amendment to the discom debt restructuring package.

At present, under the government approved Financial Restructuring Package (FRP), 50% of the accumulated debt of the discoms till March 2012 can be converted into bonds to be issued by these distribution companies to the participating lenders, backed by state government guarantees.

This package was approved in September last year by the government in order to bailout the near bankrupt discoms.

"Jharkhand, Bihar and Karnataka discoms will be able to cover their debt till March 2013 under the FRP scheme," a Power Ministry official told PTI.

The Ministry has sent this proposal to the Cabinet for its approval.

These states had approached the Ministry a couple of months ago seeking this special provision.

Under the FRP scheme, balance 50% loans will be restructured by providing moratorium on principal and best possible terms for repayments.

The support under the scheme is available for all participating state-owned discoms on fulfilling short-term mandatory conditions.

The government has also stated that the debt recast should be accompanied by concrete and measurable actions by discoms or states to improve the operational performance of the distribution utilities.

The accumulated losses of state power distribution companies are estimated at about Rs 1.9 lakh crore as on March 31, 2011, and Rs 2.46 lakh crore as on March 31, 2012.

The recast plan was formulated based on the report of an expert group headed by B K Chaturvedi, Member (Energy) of the Planning Commission.

As many as six states including Uttar Pradesh, Tamil Nadu, Himachal Pradesh, Haryana, Rajasthan and Andhra Pradesh have agreed to the debt recast.

Tamil Nadu has already issued bonds and Haryana is likely to follow soon.