Cabinet to consider Rs 4.3 trillion loan recast of discoms

Union Cabinet is likely to consider this week a proposal to recast Rs 4.3 lakh crore loans of nine state power distribution companies with a view to <g data-gr-id="35">bring</g> down their liabilities. Sources said the debt restructuring proposal once approved would help the distribution companies in these states to access cheaper loans at an interest rate of around 9 <g data-gr-id="26">per cent</g>, compared to around 14 <g data-gr-id="27">per cent</g> that they are presently paying.

The total loans to the <g data-gr-id="29">discoms</g> in the nine states -- Uttar Pradesh, Tamil Nadu, Telangana, Rajasthan, Madhya Pradesh and Jharkhand -- add up to Rs 4.3 lakh crore, sources said. The Cabinet, at its meeting on Wednesday, would consider the Finance Ministry's proposal to recast the debt of nine state power <g data-gr-id="30">discoms</g> so that the companies can repay their debt easily, they added. On account of subsidised tariffs, the state electricity <g data-gr-id="31">discoms</g> are facing cash crunch and are incurring annual losses of about Rs 60,000 crore.

The debt burden has been one of the reasons for state power utilities not going in for new projects to raise electricity generation capacity. The debt liability has also forced them to not buy any additional power from <g data-gr-id="39">new</g> project, thereby creating peak hour deficit. 

The NDA government recognises power availability as key to pushing GDP growth rate to 8 <g data-gr-id="28">per cent</g>. 

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

Sources said after the debt recast, the interest liability of power distribution companies in the nine states will come down <g data-gr-id="33">besides</g> extension of their loan tenure. According to data by the Central Electricity Authority (CEA), country's peak power deficit -- shortage in electricity supply when demand is at its highest -- was 3.2 <g data-gr-id="20">per cent</g> in <g data-gr-id="32">March,</g> 2015.