Home » Finance » UP, Rajasthan to rejig Rs 650 billion bad loans of power utilities

UP, Rajasthan to rejig Rs 650 billion bad loans of power utilities

According to reports, six months after the Centre offered restructuring packages for State Electricity Distribution Companies (discoms), Uttar Pradesh and Rajasthan are ready to implement the plan.

The Centre had unveiled the package to improve the deteriorating financial health of the State utilities. Together, the discoms of UP and Rajasthan have bad debts of around Rs 65,000 crore.

According to the Centre’s package, States have to bear half the burden by issuing bonds in phases, the rest has to be provided for by the discoms over five to seven years. The financial re-structuring package will be implemented from April 1.

Uttar Pradesh discoms have run up bad loans of around Rs 30,000 crore. This will be equally split between the State Government and the discoms, said S. K. Agrawal, Director (F&A), UP Power Corporation Ltd.

The State has five discoms — Poorvanchal, Madhyanchal, Paschimanchal, Dakshinanchal and KESCo. The financial rejig would cover all of them.

“The State Cabinet has given its go-ahead to take up the scheme. Punjab National Bank is the lead banker,” Agrawal told Business Line.

In the case of Rajasthan, the discoms would take up debts of around Rs 19,200 crore while a similar amount would be handled by the State Government, said Kunji Lal Meena, Chairman and Managing Director, Jaipur Vidyut Vitran Nigam Ltd.

The State has three distribution utilities — Ajmer Vidyut Vitran Nigam Ltd, Jodhpur Vidyut Vitran Nigam Ltd and Jaipur Vidyut Vitran Nigam Ltd.

“The State Government has given its permission. I have spoken to the banks. They would be meeting on March 19 to finalise the scheme,” Meena told Business Line.

The banks involved with the Rajasthan discoms are Punjab National Bank, Bank of Baroda and Central Bank of India.

On March 19, Jyotiraditya Scindia, Minister of State for Power (Independent Charge), is to meet heads of all discoms to finetune issues before the scheme is implemented, from April 1.

The Finance Ministry and the Reserve Bank of India will decide on the interest rate for these bonds shortly. The Government has already decided not to give these bonds the statutory liquidity ratio (SLR) status, that is, acceptable to the RBI. Banks prefer bonds with SLR status as they are more liquid compared to securities without the privilege.

Credit rating discoms is also likely to be discussed in the meeting. This is expected to be in place from the new financial year. CARE and ICRA will assess the discoms.

Leave a Reply

Your email address will not be published. Required fields are marked *


Scroll To Top