Comments
The government’s decision to restructure debt incurred by power distribution companies would provide some immediate relief for the utilities, industry body Ficci said here on Monday.
Ficci Vice President Sidharth Birla said the decision would “provide some immediate relief to the power utilities as banks will defer their payment schedules“.
He noted that while tariff revisions would take place regularly, these should reflect the true cost of production as state electricity boards have run up accumulated losses of at least Rs 2 lakh crore.
“Also, urgent reforms of the distribution sector such as reduction of Aggregate Technical & Commercial losses below 15 per cent and planning of power procurement in the long term by distribution companies are a necessity for overall power sector reforms,” Birla said in a statement.
As per the restructuring plan approved by the Cabinet Committee on Economic Affairs today, 50 per cent of the short-term outstanding liabilities of discoms would be taken over by state governments.
At the end of March 2011, state discoms’ accumulated losses stood at around Rs 1.9 lakh crore.
Terming the move as a “lifeline” for state discoms, Crisil Ratings Senior Director Pawan Agrawal said this would ensure resumption of much-needed flow of credit for these entities in the short term.
“In addition, there will be clear structural positives that should enhance the longer-term viability of the distribution sector, improving their profitability and restoring lenders’ confidence in them. Also, this will lead to cumulative savings of Rs 60-70 billion in interests for the discoms,” Agrawal said in a separate statement.
However, he cautioned that the desired impact would not be realised unless a broad-based political consensus is achieved to implement the much-needed tariff hikes, among others.
Some flexibility may be needed by state governments to accommodate the additional debt into their fiscal space under the Fiscal Responsibility and Budget Management (FRBM) targets, he added.
Also read: > Centre approves Rs 1.9 lakh crore debt reijg of discoms
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.