Big bailout package for power sector

Govt extends control over price of pulses, edible oil

The government on Monday paved the way for a bailout to cash-strapped power distributors after the Cabinet approved a proposal to restructure Rs 1.9  lakh crore of losses they have accumulated due to lack of periodic tariff revisions and free power schemes.

It, however, made clear that the restructuring of loan would be accompanied by “concrete and measurable” action by the states to improve the operational performance of the distribution utilities.

According to the proposal approved by the Cabinet Committee on Economic Affairs, 50 per cent of the short-term outstanding liabilities would be taken over by state governments.

The balance 50 per cent loans would be restructured by providing moratorium on principle and best possible terms for repayments.

A government statement said, the scheme would be effective as soon as it is notified and will remain open up to December 31, 2012 unless extended. The move is expected to help the power sector in public sector as most state-owned distribution companies are running into huge losses and are blamed for triggering probably the worst blackout in history in July that affected over 6,500 crore people.

Shares of some power sector lenders and power producers had risen 2 to 3 per cent in the morning trade on the expectations of the proposal being approved by the Cabinet.

Experts said that this will address the problem related to energy sector in the short and medium term but unless there is some proper reform in the power sector, the piecemeal dole outs will not work.

In a recent report, global rating agency Standard & Poor’s has said that the proposed restructuring package would provide only temporary relief for power distribution companies.

Among the heavily debt-laden state electricity boards are Tamil Nadu, which has losses of Rs 40,183 crore as of March 31, 2011, followed by Rajasthan with Rs 37,200 crore and Uttar Pradesh with Rs 35,211 crore.

Price control

The government also decided to extend its control on prices of pulses, edible oils and edible oilseeds to October 2013 ensure their availability to consumers at reasonable prices.

The main objective of the control order is to enable the state governments to continue to take effective de-hoarding operations under Essential Commodities Act, 1955 by fixing stock limits and licensing requirements for these commodities, especially in view of rising prices and unsatisfactory monsoon in the prevailing circumstances a government statement said after the Cabinet meeting.

Wheat and sugar have been withdrawn from the ambit of these orders with effect from 1st April 2009 and 1st December 2011 respectively.