Amendments in financial restructuring of State distribution companies scheme approved

The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved amendments to the scheme for Financial Restructuring of State distribution companies, which had been approved by the CCEA on September 24 last year, to enable the financial turnaround of the State distribution companies for their long term viability.

The Central Government had notified the Financial Restructuring Plan (FRP) for State owned distribution companies.

The scheme is under implementation in Tamil Nadu, Rajasthan, Uttar Pradesh, Haryana and Himachal Pradesh. Utilities of Jharkhand, Bihar and Andhra Pradesh, which were facing financial difficulties and were keen to participate in the scheme, could not do so due to practical difficulties in meeting certain requirements of the FRP scheme.

"...to enable these three states (Jharkhand, Bihar and Andhra Pradesh) for participation under the scheme, the cutoff date for reckoning the eligible amount of short term liabilities for issuance of bonds/reschedulement by lenders is now shifted to March 31,2013 from March 31, 2012," it said.

Implementation of the scheme in these states will help provide comfort to lenders by securing state takeover of, and guarantee for, debt besides bringing about financial discipline in the distribution sector.

It will also help provide commercial orientation to the functioning of distribution companies and casting responsibility on state governments to ensure a steady flow of revenue to them by improving efficiency of their operations.

It will accelerate the Aggregate Technical and Commercial loss reduction effort of DISCOMs, through additional incentive from the central government.

This will result in ensuring regular rationalisation of tariff to cover cost of service and also ensure timely audit of discom accounts.

It will improve the financial health of distribution utilities to enable them to procure more electricity for meeting growing demand.