Working on ways to improve health of discoms: Sinha

With the Reserve Bank warning of a Rs 53,000 crore loss to the banks on account of exposure to the power discoms, Union Minister of State for Finance Jayant Sinha today said the government is working on solutions to solve the problem.
"We've made a commitment that we'll provide 24x7 power and we can only do that if distribution companies are healthy. So, you be reassured that you'll find a solution for this," Sinha told a conference on alternate finance organised by brokerage firm Edelweiss and Wells Fargo here this evening.
He, however, did not specify what are the solutions which are being mulled, or a timeline for implementing them.

Sinha said the government is familiar with the problems plaguing the discoms and also alluded to the recast done in 2013, saying the Centre, states and the RBI have done tripartite agreements in the past.
"Considering the inadequate fiscal space, it is quite likely that states might not be in a position to repay the overdue principal/installments in time and banks may be forced to continue classifying these loans as SMA-2 as is being currently done on account of delayed servicing of interest.
"Probability of slippage of this exposure into NPAs is very high considering the implementation of new regulatory norms on loan restructuring, effective April, 2015," the Financial Stability Report released by the RBI said today.

The FSR said banks have restructured Rs 53,000 crore worth loans to the power sector, while there is a moratorium on repayment of principal worth Rs 43,000 crore as of March, 2015.

Meanwhile, Sinha said the government is trying hard to find solutions on the tax and regulatory fronts for the Real Estate Investment Trusts (REITs), but made it clear that there cannot be any compromise on the dividend distribution tax.
The objective of the government is to create a transparent and predictable regime which will give the much required certainty to investors, he said.
Stating that there is a possibility to raise up to Rs 1 trillion annually by leveraging the Rs 20,000-crore commitment to the National Infrastructure Fund (NIF) made in the Budget, he said infra investment is a key to making the higher growth trajectory sustainable in the long-run.

The NIF can act as an anchor investor in large infrastructure projects like building highways, world-class convention centres and airports and the special purpose vehicles created for them can, in turn, attract more investments, he said.
He added that during recent visits large investors in Canada, West Asia, Australia and Japan have evinced interest to co-partner with the NIF for such projects.