Rajasthan joins Centre's power discom recast scheme

The state has recorded the highest discom losses. At present, it owes Rs 85,000 crore to lending institutions

A month after the Union government announced its financial restructuring plan for state power distribution companies, Rajasthan on Monday became the third state to join the scheme. Earlier, Andhra Pradesh and Jharkhand had joined the scheme.

The scheme is the first move of the National Democratic Alliance (NDA) government to set right the power distribution sector through restructuring of stressed loans in the business. The restructuring plan was approved last month. "Congratulations to CM of Rajasthan Smt. @VasundharaBJP on the state joining UDAY (Ujwal DISCOM Assurance Yojana)," said Power Minister Piyush Goyal in a tweet.

The Vasundhara Raje-led Bharatiya Janata Party (BJP) government in Rajasthan had held a summit last fortnight to attract global investments in the state. CS Rajan, chief secretary of the state, had told Business Standard the state was ready to join the scheme and take over half of the total debt of the state's power distribution companies as on March 31, 2015 and the rest 25 per cent by next financial year (2016-17).

Rajasthan has recorded the highest discom losses. At present, the state owes Rs 85,000 crore to lending institutions. The state, along with other loss-making states, has already been put on notice by the Reserve bank of India (RBI) to clear its debt or be debarred from receiving financial aid. Rajasthan has the highest debt of Rs 85,000 crore among states followed by Tamil Nadu's Rs 70,000 crore and UP with Rs 32,000 crore.

As per the scheme, state governments can take over 75 per cent of the debt of discoms as on September 30 and payback lenders by selling bonds. For the remaining 25 per cent, discoms will issue bonds. This would help clean up the cumulative debt of Rs 4.3 lakh crore accumulated on state-owned utilities and bring relief to lenders.

For the next two financial years, the centre will not include the debt taken over by the states in the calculation of their fiscal deficit, which could have gone up by as much as Rs 3.2 lakh crore.

States are suggested to take over 75 per cent of discom debt over two years - 50 per cent in 2015-16 and 25 per cent in 2016-17. Discoms' debts, which are not taken over by the state, will be converted by the banks and financial institutions into loans or bonds with interest rate not more than the bank's base rate. Alternately, this debt might be issued by the discom as state-guaranteed discom bonds at the prevailing market rates.

DEBT WOES

Rs 85,000 crore, is what Rajasthan owes to lending institutions
Rs 70,000 crore owed by Tamil Nadu
Rs 32,000 crore owed by Uttar Pradesh

• The states have been put on notice by the RBI to clear debts or be debarred from receiving financial aid
• They can to take over 75% debt of discoms as on September 30