To get continued funding from banks, distressed State power distribution companies (discoms) must make users pay for the power supplied to them, according to Finance Minister Arun Jaitley.
Speaking at the Indian Banks’ Association’s 68{+t}{+h} annual general meeting, Jaitley observed that there are four States that are in dire straits as far as their discoms are concerned and in the case of four others the situation is reasonably challenging.
He, however, did not disclose the names of the States.
“The Reserve Bank of India has already put those State governments on notice that if they don’t charge adequately and don’t make the users pay for the power supplied to them, the banking system cannot continue to support them,” he said.
Among others, Telangana, Madhya Pradesh and Tamil Nadu have weak discoms.
Credit rating agency Crisil, in a statement in July, said ₹1.90 lakh crore of debt is owed by weak Discoms for which moratorium on principal repayment – based on financial restructuring package announced in 2012 – ends in the current and next fiscal.
“Till date, government support has prevented these discoms from turning weak. Assurance of continuing financial support is necessary else this debt, too, can be at risk,” said Crisil.
Jaitley compared the state of the power sector being similar to that of a highway or expressway which finally converges into a single or kaccha road which causes traffic jam.
“Whereas our power generation capacity has hugely improved (last year we were surplus in power), our distribution network through national grid has improved but the final access or the last mile access is through the SEBs and at the level of SEBs, the reforms have been carried out by only very few States,” said the Finance Minister.
He added that the Power Ministry is in active discussions with these States and most of them have responded quite positively. A meeting was held under the Prime Minister’s leadership and some important changes in reforms in relation to the States with distressed discoms have been worked out.
Reforms measures “Those who want to fall outside this reform process will then have to suffer at their own policy levels and it will be advisable to all of them to follow the Power Ministry’s suggestion so that in the course of next one or two years, the distress of those States can be resolved,” Jaitley said.
On other stalled projects, the Finance Minister said they are being monitored by the Prime Minister’s Office now and “a number of road blocks have been removed”.
He also said that a bankruptcy code, a law on arbitration with a fast track system with resolution within six months and a law on resolution of disputes in major contracts are also on cards.