Power tariffs set to rise as govt. clears restructuring
package
Power tariffs across the country are set to
rise as the government on Monday cleared the much awaited proposal to
restructure the debt of state electricity boards (SEBs) and power distribution
companies (discoms), which have accrued losses to the tune of Rs 1.9 lakh crore
(as of March 31, 2011).
- The
plan, which has been approved by a cabinet panel headed by Prime Minister
Manmohan Singh, includes measures such as regular revisions in power tariffs
and state governments taking over half of the short-term debt of distribution
companies, most of which are owned by state governments.
- According
to the contours of the restructuring package, half of the outstanding short
term liabilities upto March 31, 2012 will be taken over by State Governments.
- This
shall be first converted into bonds to be issued by Discoms to participating
lenders, duly backed by State Governments guarantee.
- The
rest of the discoms` debt will be restructured by rescheduling loans and the
discoms will be provided a moratorium on the principal and the best possible
terms for this restructuring to ensure viability of this effort.
- It
may be noted that in order to look into the issues of State Discoms and to
suggest a strategy for the turnaround of the distribution sector, the Planning
Commission constituted an Expert Group under the chairmanship of B K
Chaturvedi, Member (Energy), Planning Commission.
- The
approved scheme is formulated based on the report of the Expert Group and
deliberations in the PMO and Ministry of Finance.
Mandatory conditions
In an attempt to restore the power purchasing
capacity of the debt ridden discoms and also to enable Banks to recover their
loans, the Cabinet Committee on Economic Affairs has brought a list of
mandatory conditions that need to be followed by all state governments. These
are as under:
- State
Governments will have to convert all their loans to equity.
- All
outstanding energy bills of the state departments or agencies as on March 31,
2012 are to be paid by November 30, 2012.
- Elimination
of the gap between average cost of supply (ACS) and average revenue requirement
(ARR) within the period of moratorium of the bonds.
- Involvement
of private sector in state distribution sector through franchisee arrangements
or any other mode of private participation to be prepared within a year by the
Discoms.
- Tariff
orders will be notified by April 30 of each financial year.
- Fuel
cost adjustment will be allowed as directed by APTEL.
- FRP
is to include targets for progressive reduction in Short Term Power (STP)
purchase by the State Discoms.
- Subsidy
should be paid upfront by the State government.
- Prepaid
meters will be installed by March 31, 2013 for all Government consumers.
- The
audited accounts for and up to FY 2010-11 are to be finalized by September 30,
2012 and of FY 2011-12 by December 31, 2012.
Salient features of the bailout package
The salient features of the debt
restructuring scheme are as follows:
- 50
percent of the outstanding short term liabilities upto March 31, 2012 will be
taken over by State Governments. They will be first converted into bonds to be
issued by Discoms to participating lenders, duly backed by State Governments
guarantee.
- Takeover
of liability by State Governments from Discoms in the next 2-5 years by way of
special securities and repayment and interest payment to be done by State
Governments till the date of takeover.
- Restructuring
the balance 50 percent Short Term Loan by rescheduling loans and providing
moratorium on principal and the best possible erms for this restructuring to
ensure viability of this effort.
- The
restructuring/reschedulement of loan is to be accompanied by concrete and
measurable action by the Discoms/States to improve the operational performance
of the distribution utilities.
- For
monitoring the progress of the turnaround plan, two committees at State and
Central levels respectively are proposed to be formed.
- Central
Government will provide incentive by way of grant equal to the value of the
additional energy saved by way of accelerated AT&C loss reduction beyond
the loss trajectory specified under RAPDRP and capital reimbursement support of
25 percent of principal repayment by the State Governments on the liability
taken over by the State Governments under the scheme.
- Ministry
of Power will bring out a draft model legislation on State Electricity
Distribution, Responsibility bill, after due inter-ministerial consultation
within a period of twelve months from the approval of the Scheme.
- States
will enact the legislation within twelve months from the date of circulation of
model legislation by Ministry of Power to mandate the compliance of the
provisions of FRP.
Posts
