Economy

Discom re-structuring to kick-start in a month: Power Secy

| Updated on: Nov 22, 2012

The restructuring of State Electricity Distribution Utilities (Discom) would kick-start in a month with nearly seven States coming forward to take up the scheme, Power Secretary P. Uma Shankar said on Thursday.

 

The proposal is to restructure Rs 1.20 lakh crore of short-term debt in the books of discoms. Of this, 50 per cent load is to be borne by the States by issuing bonds in phases.

Most of the bad loans are with States such as Rajasthan, Punjab, Haryana, Uttar Pradesh, Madhya Pradesh, Tamil Nadu and Andhra Pradesh.

 

Jharkhand is another State that has shown interest, Uma Shankar said.

 

The Secretary said the Ministry is confident that there would be takers for the ‘special securities’ to be issued by the States. “The special securities will not be inferior to bonds with statutory liquidity ratio (SLR) status,” he added.

 

“The coupon rate of the securities is yet to be decided. It would be decided by the Finance Minister,” said Uma Shankar.

 

Special securities will get sovereign guarantees, wherein the Centre would indemnify the liability in case of default.

 

Industry watchers say that banks are sitting on cash as incremental borrowing in the first two quarters has dropped to 41 per cent of deposits — a four-year low.

 

The Government has kept the re-structuring package open till December 30 and any interested State can opt for it.

 

Financial institutions fear that some States may not back up the debt recast proposal as they do not have room under the Fiscal Responsibility and Budget Management Act.

 

Few States such as Rajasthan, Uttar Pradesh and Punjab are reportedly talking directly with the banks to recast their bad debt. Banks such as Bank of Baroda, Punjab National Bank, Oriental Bank of Commerce and Central Bank of India, among others, are involved in the discussions.

 

siddhartha.s@thehindu.co.in

 

Published on March 12, 2018

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