The Rs 2 lakh crore restructuring package prepared by the Centre to bail out debt-ridden state electricity distribution companies or discoms is all set to roll out from June 1, 2013 wherein state Governments would repay 50 per cent of state electricity boards' loans by converting them into long term bonds to be given to banks, while the remaining portion would be remodelled by banks with a three-year moratorium or repayment holiday on principal amounts.
This would give flexibility to the states to repay the loans and at the same time reduce the burden on the discoms. Discoms of states like Uttar Pradesh, Rajasthan, Jharkhand, Goa, Kerala, Tamilnadu among several others are to benefit from this move. Rajasthan has the highest loan amount of Rs 40,000 crore. Punjab and Madhya Pradesh though have eased themselves out of the package claiming that their amounts are not so big and can be dealt with.
Highly placed official sources confirmed to The Pioneer that the restructuring package which had missed two deadlines (that of December 31, 2012 and then March 31, 2013), is all set to be implemented by June 1, after a consensus was reached on the point that the coupon rate of the bonds to be issued by states would be equivalent to that of Government Securities (or G-Sec as it is called in financial parlance).
As part of the restructuring package of discoms' humungous loan amount, 50 per cent of it would be converted to long term bonds which would be backed by guarantees of the state governments and issued to banks, while the remaining 50 per cent turned into a three-year moratorium by the banks which have given the loans to discoms.
G-Secs are issued by the Government for raising a public loan or as notified in the official Gazette. They consist of Government Promissory Notes, Bearer Bonds, Stocks or Bond held in Bond ledger Account. They may be in the form of Treasury Bills or Dated Government Securities.
Owing to differences on what should be the coupon rate of the bonds between the Finance Ministry, Power Ministry as well as the concerned state governments, the bailout packages had been missg its deadlines, even though it had been announced in September 2012.
After several parleys and deadline extensions, the deadlock was resolved with the consensus having reached that the coupon rate should be equivalent to that of G-Secs. Subsequently this move is expected to reduce the financial burden off the discoms and at the same time give greater flexibility in terms of time to states to repay the huge debt amounts.
Over the years, the discoms were being overburdened by huge debts mainly due to heavy operational losses in the absence of periodic tariff revisions and also because of transmission and distribution (T&D) losses. It was to address this problem that the Centre had decided to come out with the restructuring package for bailing out these discoms.
Among the major lenders to state discoms are some of biggest state-owned banks like State Bank of India, Canara Bank, Central Bank of India and Punjab National Bank.