Govt to propose draft model bill for state discoms

After announcing a debt restructuring package for the state electricity boards, the government today said it would bring a draft model bill for fixing responsibility on state discoms.

“Ministry of Power would bring out a draft State Electricity Distribution Responsibility bill after due inter-ministerial consultation within a period of 12 months from the approval of the scheme,” Power Minister Veerappa Moily said.

States will enact the legislation within 12 months from the date of circulation of model legislation by Ministry of Power to mandate compliance of the provisions of the financial restructuring package, he said.

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The Cabinet Committee on Economic Affairs approved the scheme for financial restructuring of state distribution companies (Discoms) yesterday.

The scheme contains various measures required to be taken by state discoms and state governments for achieving the financial turnaround of the discoms by restructuring their debt.

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“The accumulated losses of the state discoms are estimated to be about Rs 1.9 lakh crore as on March 31, 2011 and Rs 2.46 lakh crore as on March 31, 2012,” he said. Under the scheme, 50 percent of the short-term outstanding liabilities would be taken over by state governments.

This shall be first converted into bonds and then issued by discoms to participating lenders, duly backed by the state government’s guarantee.

Balance 50 percent loans would be restructured by providing three year moratorium on principle and best possible terms for repayment. The objective of the proposed scheme is to enable the state governments and discoms to carve out a strategy for the financial turnaround of the power distribution companies.

This will be done by lenders agreeing to restructure or reschedule the existing short-term debt. The approved scheme is not mandatory for the states. So far only seven states, Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Punjab, Haryana and Tamil Nadu have come on board, Moily said.

The minister also suggested that tariff rationalisation should take place annually by the states. With the announcement of this scheme, the government aims to improve the financial health of the distribution utilities to enable them to procure more electricity for meeting their growing demands.

The approved scheme is formulated based on the report of an expert group headed by B K Chaturvedi, Member (Energy) Planning Commission and through deliberations in the PMO and Finance Ministry.

PTI