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Banks to finance TNEB's 100% cash loss for FY14

Under earlier agreement, banks were to finance 70% of the electricity board's cash losses

Krishna Pophale  |  Mumbai 

Lenders have decided to tweak the financial restructuring package (FRP) for Tamil Nadu Electricity Board (TNEB). According to the revised terms, the will now 100 per cent of TNEB’s cash loss, as against 70 per cent decided earlier, for the first year following a request by the state government.

The Tamil Nadu government had conveyed to the lenders that it might not be able to bear the 30 per cent cash loss as was decided earlier.

Tamil Nadu is the first state to get financial restructuring plan (FRP) done after the central government announced the scheme for restructuring of loans for state electricity boards (SEBs).

“We had approved the FRP in March… The request for 100 per cent funding came later; so we would be putting the revised proposal shortly,” Shyamal Acharya, deputy managing director, State Bank of India, told Business Standard today.

SBI is the nodal bank for restructuring of TNEB. A consortium of 17 has a total exposure of Rs 12,000 crore to TNEB.

“On reworking (the plan) it was found that they will incur cash loss for the first three years, and so it was felt that it (funding) will help them,” Acharya said.

For the second year, will fund 70 per cent of the cash loss and in the third year they would fund 30 per cent of the cash loss, Acharya added.

According to Acharya, from the fourth year onwards it is expected that there won’t be any cash loss with tariff hikes (in Tamil Nadu).

TNEB has an accumulated loss of Rs 54,500 crore, and last year it suffered a loss of Rs 12,110 crore.

TNEB is planning to bring it down to Rs 9,000 crore this year. This means that banks will be funding this loss fully this year.

TNEB is not planning any tariff hike this calendar year. However, there might be an increase in tariff in last quarter of the financial year.

Another banker with a lender having an exposure to TNEB said the Tamil Nadu government had earlier conveyed that it might not be able to bear the 30 per cent loss and, hence, requested the banks to fund this loss fully for the first year, which was agreed by all stakeholders at a joint meeting held on April 30. Ministries of and power, the state government and banks participated in the meeting.

Last week, the ministry of power said 10 SEBs had expressed their willingness to join the scheme.

Besides Tamil Nadu, the other states that have come onboard are Andhra Pradesh, Bihar, Haryana, Himachal Pradesh, Jharkhand, Kerala, Meghalaya and Uttar Pradesh.

The last date of registration for the scheme was first extended to March 31, 2013, from December 31, 2012, and now it has been further extended to July 31, 2013.

Last year, the government announced the financial restructuring package for SEBs which are reeling under collective losses of Rs 2.46 lakh crore as on March 2012.

The government will restructure Rs 1.5 lakh crore debt of SEBs under the scheme.

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First Published: Wed, May 22 2013. 00:47 IST