Cabinet may take up discoms burgeoning debt issue tomorrow

New Delhi: In view of the rising debt of power distribution companies, the Cabinet is likely to take up tomorrow the issue of tackling Rs 4.3 lakh crore loans of these discoms to bring down their liabilities.

Hit by subsidised tariffs, state electricity discoms are facing cash crunch and are incurring annual losses of about Rs 60,000-70,000 crore.

This is also affecting public sector banks as their bad loans are rising. The Power Ministry is working on a proposal to deal with over Rs 4 lakh crore loans of power distribution companies with a view to bring down their liabilities.

"Cabinet meeting that was scheduled today was deferred to incorporate this issue of mounting liabilities of discoms. The meeting is now scheduled for tomorrow," a source said.

The debt burden has been one of the reasons for state power utilities not going in for new projects to raise electricity generation capacity. It has also forced them not to buy additional power, thereby creating peak hour deficits, the source added.

Meetings at the level of the Prime Minister's Office have been held to clear roadblocks to stalled projects and the high debt of state utilities has been identified as the prime reason for the current state of the sector.

The government wants to draw a long lasting financial restructuring plan, in the form of a debt recast, that would provide incentives to discoms to generate more revenue.

Another senior official said under the debt recast plan, the discoms will get some relief by way of reducing interest rate.

That may be reduced from 11-12 percent to 7-8 percent. Besides the repayment tenure could be stretched, he added.

Sources said after the debt recast, the interest liability of power distribution companies in the nine states will come down besides extension of their loan tenure will also help strengthen their financial position.

The loans to the discoms in 9 states including Uttar Pradesh, Tamil Nadu, Telangana, Rajasthan, Madhya Pradesh and Jharkhand add up to Rs 4.3 lakh crore.