Money & Banking

Govt to meet bankers today over power utilities’ bailout

Our Bureau New Delhi | Updated on November 16, 2017 Published on July 09, 2012

The Government has called a meeting of bankers to discuss restructuring of bad loans worth Rs 2 lakh crore in the books of State electricity distribution utilities (discoms).

“The Financial Services Secretary, Mr D.K. Mittal, will meet the bankers on Tuesday. Senior officials from the Power Ministry would also take part in the discussions,” a Government official said.

Earlier, the Finance Ministry and the Reserve Bank of India had turned down the Power Ministry's proposal seeking refinance of accumulated losses incurred by these utilities. The Finance Ministry and the RBI clearly said that refinancing of such debt was not viable as it would increase non-performing assets (NPAs) of banks and other financers. In the current economic scenario, banks were not in a position to carry additional NPA burden, it added.

Following this, the Power Ministry put forth a new proposal where a loan restructuring programme spread had been proposed over three to seven years. Half of these losses would be taken up by the respective States, which would issue long-term bonds in phases. For the remaining 50 per cent losses, distribution companies would get a three-year moratorium on principal payment.


However, it is understood that banks have raised several objections on this proposal. The Power Ministry claims that proposal was prepared after deliberating with banks, States and all electricity distribution utilities. The Ministry plans to seek approval from the Cabinet Committee on Economic Affairs (CCEA) soon.

Nearly 75 per cent of the debt is with seven States — Madhya Pradesh, Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Andhra Pradesh. The losses include loan repayments, pending subsidy receipts and payment to power producers, among others. The high utility losses are because of low tariff hikes, rising burden of fuel prices and non-receipt and delayed subsidy payment from States. The aggregate annual loss of the utilities before subsidy increased at 33 per cent annually.

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Published on July 09, 2012
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