Pension and mutual funds, and insurance companies have shown an appetite for State bonds meant to rescue stressed power distribution utilities. This despite the bonds having non-SLR (statutory liquidity ratio) status.
Banks prefer bonds with SLR status as they are more liquid than those without such a tag.
Non-SLR bonds often see muted demand as banks are under no compulsion from the Reserve Bank of India to subscribe to them.
Besides, these bonds have to offer higher interest rates to make themselves attractive for banks and financial institutions.
Enough demand However, Power Ministry officials say there is enough demand for bonds to be issued under Ujwal Discom Assurance Yojna or UDAY — a restructuring package for ailing state utilities.
“There is more than enough demand — of over ₹50,000 crore — for these bonds, particularly from insurance funds, pension funds and mutual funds which have a lot of cash,” said a senior Ministry official.
Last month, the Cabinet cleared the UDAY scheme under which discoms will pass on their debt to States over a two-year period.
In turn, States will issue non-SLR bonds either in the market or directly to the bank/financial institution (FI) with an interest rate not more than the bank’s base rate plus 0.1 per cent.
Losses, debt situation As of March 2015, discoms had accumulated losses of around ₹3.8-lakh crore and debt of nearly ₹4.3-lakh crore.
The Power Ministry is hopeful of most States joining the scheme by the end of the fiscal, barring a few that are likely to join by June after scheduled Assembly elections.
“There is no time limit, but we expect all States to come on board by March. The associated benefits will only flow in when they join UDAY,” said the official, adding that the draft agreement for the scheme is being finalised.
Almost nine States, including Himachal Pradesh, Andhra Pradesh, Rajasthan and Jharkhand, have already joined the scheme.
No move to privatise The Ministry, however, stressed that the reforms scheme does not indicate any intent of the government to privatise discoms.
“Reform and rationalisation does not mean privatisation. If States want to serve their people better, they can surely bring in competition. They have the choice,” the official said.