Newly-appointed secretary under the ministry of power Subhash Chandra Garg, who was until recently the finance and economic affairs secretary, said while he was in the finance ministry, no one opposed the idea of sovereign bonds, including the government.
Garg, who was shifted to the power ministry on Thursday, continued to defend the Union Budget proposal of raising resources via overseas foreign currency sovereign bonds in the current fiscal year. The issuance was estimated to be $10 billion. Following negative response from several stakeholders, it was reported that the Prime Minister’s Office (PMO) had asked the finance ministry to issue rupee-denominated bonds, instead of foreign currency bonds.
“The sovereign bond issuance is intended to ease the pressure on the domestic availability of resources, especially private sector. It was a very well-considered decision, has enormous benefits and risks are much less. During the time I was there (finance ministry), I didn’t hear anyone including the government questioning it,” Garg said, while addressing the media after taking charge at the ministry of power.
He added that India's external liabilities are very small and make for a perfectly legitimate case to consider sovereign bonds. “Of the twenty G20 countries, 19 issue sovereign bonds. So India will not be the only one to do that,’ he said.
Garg announced voluntary retirement on Thursday and will serve in the power ministry till October 31. On his decision, Garg said he had informed PMO on July 18, much before he was moved to the power ministry, so the two are not linked.
“I had discussed my voluntary retirement with the PMO on July 18, much ahead of the transfer order. There is no connection between the two. I formally submitted the application on July 24,” he said.
On July 17, Garg refused to sign on the report finalised by the former Reserve Bank of India (RBI) governor Bimal Jalan-led committee reviewing the central bank’s economic capital framework (ECF), this paper reported on Friday.
When asked, Garg said the report is not final. “I have been saying this; the committee is still deliberating it. So now those deliberations will be taken forward by a new representative of the department. The Committee has not come to any conclusion.”
On his plans for the power sector, Garg said improving the financial condition of power generation and distribution companies (discoms) is his top priority. “There are several very important issues in the power sector, distribution reforms and finances of the power sector, there are some places where the PPAs are being questioned. We have to bring stability to the sector. There are tariff policy issues that are very important and need to be finalised.”
Regarding another round of financial bailout of the state-owned discoms, Garg said this has been done three or four times and has not worked. “So we have to look at newer ways,” he said.
The BJP government in its first term launched UDAY scheme for turning discoms around. The financial part was concluded with discoms issuing bonds against their debt; operational improvement is still not achieved, leading to discoms making losses again.