Power Utilities Doleful Over One-Time Seb Dues Write-Off

The central power utilities have expressed reservations about the one-time settlement scheme of state electricity boards (SEBs) dues, despite the chairman of the expert group, Montek Singh Ahluwalia, saying that the signing of pacts for power sector reforms should be viewed as a starting point.

Ahluwalia said, after submitting the report to power minister Suresh Prabhu on Friday, that the scheme will not solve the problem of how to make the escrows given by the SEBs for independent power producers (IPPs) to become viable.

"But the banks will at least accept that the states are working on a reforms programme," said Ahluwalia. He said the committee had considered banning escrows for SEBs at one stage but had decided to drop the clause.

Ahluwalia said that since the SEB problem is not a once off problem, the committee has tried to apportion the financial responsibility among consumers, state governments and the central power utilities. He said the power tariffs may need to be raised some what higher than the real cost of electricity, but the state electricity regulatory commissions (SERCs) should acquiesce in it as otherwise the SEBs would not be able to turn around. He said it will be unwise to expect that the entire resources for making the SEBs viable can be found from only one source.

Though Ahluwalia said the committee had decided not to milk the central public sector companies for finding the resources, sources in these companies expressed unhappiness at the formula. They said that National Thermal Power Corporation (NTPC) for instance will have write off about Rs 11,000 crore from its total dues of around Rs 17,000 crore from the SEBs affecting its balance sheet.

However, NTPC sources said that if the government went ahead with the scheme, there was a possibility that reforms in the power sector by states will make SEBs commercially viable, which will improve payment of current bills.

Ahluwalia said that the five-year moratorium on payment of principal amount had been kept to allow states the requisite time to become capable of servicing the bonds, with the help of milestones-linked power sector reforms. "If the states do not become capable during this period then there will be problem," he said.

Ahluwalia said the present deduction of 15 per cent from the annual plan of states towards recovery of electricity dues will be discontinued. He justified the move on the ground that "ensuring past securitisation of dues is no substitute for enabling that SEBs pay current dues".

The expert group is expected to give the second part of its report on transmission and distribution losses by next month. Prabhu said the empowered committee on power sector, which also includes finance minister Yashwant Sinha and two chief ministers each from every region, will discuss the recommendations and take a final decision on their implementation soon.