The Centre has told the Tamil Nadu government that it cannot give any relaxations for borrowings beyond the mandated norms for the Discoms financial restructuring package.
At a recent meeting the Union Power Ministry expressed its inability to go beyond the FRBM (fiscal responsibility and budget management) norms. The Power Ministry, however, agreed to tweaking some other norms to enable the State join the Centre’s scheme to revive financially stressed electricity distribution utilities – the Ujwal DISCOM Assurance Yojana or UDAY.
“We cannot change the basic structure of the scheme as it has been approved by the Union Cabinet, but concessions can be worked out within the norms. States are coming out with their own specifications and we have facilitated wherever we can,” an official said.
Chief Minister J Jayalalithaa had in June in a memorandum given to Prime Minister Narendra Modi spelt out certain modifications stating that if not considered then it would be difficult for the State to implement UDAY.
Though Tamil Nadu has in-principle agreed to join the Centre’s scheme, the Power Ministry is being cautious. A source involved with the negotiations said, “we have to wait for the MoU draft, which the State will send once its Cabinet approves.”
Under UDAY, States take over 75 per cent of the Discom debt and pay it back by issuing bonds. Jayalalithaa had put forth a condition that Tamil Nadu will takeover ₹17,500 crore of loans of Tangedco, if additional borrowing towards principal repayment and interest servicing on account of Discom debt take over is provided over and above the normal borrowing limit by relaxing FRBM norms for 15 years.
“This is something which falls under the domain of the Finance Ministry and we have communicated it to the State government,” another official said.
For implementing UDAY, Jayalalithaa had also sought that the State government be allowed to float 15-year bonds with five-year moratorium and floating interest rate of not more than 20 basis points. “Tenure of the bonds can be flexible. Some States have preferred 10-year bonds,” a member of the negotiating team told BusinessLine .
The Tamil Nadu Chief Minister had also asked the Centre to provide 25 per cent of the taken over debt as grant similar to the assistance provided in the Financial Restructuring Programme of 2012 and a provision for quarterly revision of electricity tariffs to offset fuel price change.
Officials concerned said, the Centre had accommodated a lot, if not all, of the conditions of Tamil Nadu government. Regarding relaxation of the FRBM norms, the Power Ministry said it will convey the issue to the Finance Ministry, but did not make any commitments on that score.
If Tamil Nadu, which has Discom debt of ₹80,000 crore, joins the scheme then the total number of States coming on board will be 18.
The combined Discom debt, including Central PSU dues that would be restructured in respect of these 17 States that have already joined the scheme is around ₹2.57 lakh crore, which is around 68 per cent of the total outstanding Discom debt as on September 30, 2015.
With inputs from Chennai Bureau