Centre to restrict borrowings by discoms

Efficiency parameters likely to be made part of restructuring package

Borrowings by state-run power distribution companies (discoms) are likely to be restricted by strict parameters set by the Union government. Under the financial restructuring programme, the average national aggregate transmission and commercial (AT&C) losses are likely to be fixed at 15 per cent by 2018-19. The government is also targeting to eliminate annual financial losses of all discoms from the current level of Rs 60,000 crore.

The move is aimed at not only bailing out lenders, which have exposure of Rs 4 lakh crore to discoms, but also prevent bad debt. "The discoms would have to commit to a loss-reduction trajectory so the national average comes down to 15 per cent from 27 per cent," said a government official. The amount of loss reduction would vary from state to state.
 

To service the balance debt and bring in long-term efficiency, the states would have to initiate rate increases. The central government is likely to sign state-specific memorandum of understanding (MoU). The focus is on Rajasthan, Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Haryana, Jharkhand, Bihar, and Telangana.

RECHARGING POWER SECTOR

• Current average AT&C losses 27% of the power supply
   
• AT&C losses to be reduced by 15%
   
• Financial loss of discom increases by Rs 60,000 crore annually
   
• Future lending to be linked to performance of the discom, loss reduction
   
• 8 states are in discussion to sign up for restructuring of debt
  

 

Financial losses are more than Rs 4 lakh crore

A person said the Centre was looking to sign the first MoU with Uttar Pradesh. "The state is self-driven and co-operative in the reforms programme," said a Centre official.

The debt limit in the gross state budget plan would also be increased to ease state government to take over the discom losses. Though this would enable discoms to borrow more, debt linkage with loss-reduction targets will prevent accumulation of bad debt.

Discoms incur AT&C losses due to inefficient power supply and energy theft. They contribute 40 per cent to financial losses. Increase in cost of power, unpaid dues, subsidised tariff, and higher interest outgo compound financial losses.

The Centre is looking at giving 0.25 per cent relaxation in their fiscal responsibility and budget management (FRBM) limit. "This would help states absorb losses and issue bonds in the short term," said the official. FRBM lays restriction on the deficit a state can have. A relaxation would translate into states adjusting more fiscal deficit in their public accounts.