Rising incidents of stressed assets in the power sector have prompted banks to ask for tariff revisions every year by the state electricity boards (SEBs), so that the business model remains viable.

“The SEBs have to increase their tariffs annually to pass on their increased cost to their end-users. Otherwise, the business model will be unviable,” Dena Bank executive director Mr A K Dutt told PTI here, adding the revision should be around 20 per cent annually.

In case of a possible debt recast for the SEBs, the public sector banks will ask for increasing the general level of efficiency, he added.

Currently, banks are worried about the advances extended to the SEBs of Tamil Nadu, Rajasthan, Uttar Pradesh, Bihar, Haryana, Madhya Pradesh and Punjab, which according to the rating agency Crisil, are the most vulnerable ones.

As per Crisil, losses of power distribution companies rose by 24 per cent to Rs 27,500 crore between 2006-07 and 2009-10 and it could rise to Rs 35,000-40,000 crore in 2010-11, mainly due to the problems the utilities are facing.

“Though we have some exposure to the Rajastan SEB, there is no request for debt-restructuring,” Mr Dutt said, adding the SEB has made some presentation to the Centre.

Recently, the second largest public sector lender Punjab National Bank, which had restructured Rs 2,500 crore of loans in the second quarter, said of this, Rs 1,800 crore were from the loan extended to the TNSEB

Another public sector bank, Indian Overseas Bank, too, said the bank is currently going slow in its lending to the power sector.

“We have less space to lend to the power sector, as the exposure to this segment is now at the mandated upper level. However, SEBs have to increase their efficiency and raise tariffs annually for any further lending from us,” IOB chairman and managing director Mr M Narendra said.

He also said, his bank has not received any request from any SEB for debt-restructuring.

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