States will have to finance loss-making discoms: FM Jaitley

Hong Kong: Making it clear that states will have to finance their loss-making electricity boards, Finance Minister Arun Jaitley on Monday said a plan has been worked out by the Power Ministry and it would now discuss the same with the respective state governments and their discoms.

"There was a meeting last week. The plan has been brought out by the power ministry," Jaitley told reporters here when asked about the government's steps for tackling the huge debt burden of state electricity boards.

"The power ministry is going to speak to the defaulting state electricity boards and the governments of those states with regard to the plan that has been made.

"The states will have to finance them. After we have negotiated that with the plans, then we will go ahead," he said.
In a stern message to states, Jaitley had yesterday said states cannot expect public sector banks to fund the deficits faced by power distribution companies.

Expressing concern over the financial health of some state-owned power distribution companies (discoms), the Finance Minister also said that some states are not levying adequate electricity tariff.

His remarks come against the backdrop of many discoms facing financial stress that has also resulted in rising non-performing assets in the banking sector.

"... Some states were not charging adequate money for power which was affecting the discoms and these states cannot expect the PSU banks to fund the deficit of discoms," Jaitley said while addressing investors and business leaders here.

The combined debt of discoms is estimated to be more than Rs 3 lakh crore and grappling with acute financial stress, many of them are even not able to purchase electricity.

The gross Non Performing Assets (NPAs) of state-owned banks at the end of March quarter stood at 5.20 per cent of their total loan portfolio.

NPAs have surged mainly due to stress in infrastructure sectors like highways, steel, power and state discoms.

Recently, Power Minister Piyush Goyal had said that the Centre cannot be considered as a bailout bank for helping debt-ridden discoms and states would have to find a way out of the crisis.

"Some states have serious crisis (power) looming large. But at the end of the day, the Government of India can only facilitate the turnaround of these discoms. And we cannot finance it," Goyal had said.