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Title:Govt proposes loan swap for discoms

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NEW DELHI: While refusing a fresh bailout to electricity distribution companies, the Centre has asked state governments to issue bonds for raising funds at 8.5-9 per cent and help the power firms swap their high-cost loans, raised at 13-14 per cent, to improve their financial health.

The move will take care of the legacy issues. For future funding, the power ministry is reading the riot act and has clearly told state governments with weak discoms to cut the aggregate technical & commercial (AT&C) losses to 15 per cent, which in Jharkhand was estimated at close to 42 per cent and at around 32 per cent in parts of Uttar Pradesh.

Sources familiar with the talks said that during consultations with the states, the power ministry has clearly said that they need to undertake 100 per cent metering and keep the farm sector on a separate grid. In fact, funding from schemes such as Integrated Power Development System and Deen Dayal Upadhyaya Gram Jyoti Yojana is also linked to reforms. In an interview last week, financial services secretary Hasmukh Adhia had told TOI that talks have been initiated with Uttar Pradesh, Rajasthan and Haryana.

Discoms in Rajasthan, UP, Tamil Nadu and Jharkhand are seen to be under maximum stress with high amount of debt as well as accumulated losses. The poor health is also putting pressure on banks, which at the behest of the Centre had extended a financial restructuring plan without any asset backing. Although the discoms are backed by state governments, any delay in repayment of loans will increase the headache for the state-run lenders, grappling with mounting bad debt.

Discoms in Rajasthan are estimated to have combined losses of nearly Rs 80,000 crore and are yet to implement some of the reform steps that would have entitled them for transitionary support. Another problem is the inability of the discoms in the state to revise tariff between 2005 and 2011. Even now, along with West Bengal and Tamil Nadu, the tariff order in the state was issued late. In Tamil Nadu, losses are estimated at around Rs 14,000 crore.

In UP, all discoms are dogged by losses. The Centre has offered a Rs 5,000-crore helpline through REC and PFC. PFC CMD M K Goel confirmed that talks have been initiated with some states. "We are looking at some transition funding as part of the talks that the government has initiated with the states to work out a road map. After all, health of discoms is critical for revival of the power sector," Goel said.

There are of course others such as Maharashtra, Andhra Pradesh, Jharkhand and Telangana, where the order for 2014-15 was not issued, resulting in widening of losses.

Jharkhand and Dakshinanchal Vidyut Vitran Nigam in Uttar Pradesh received the worst ratings in the annual ICRA-power ministry study.

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