Bailout linked to discoms' performance, says Moily

A day after the government approved a bailout package for debt-ridden discoms, Power Minister M Veerappa Moily on Tuesday made it clear that it “will be linked to their performance.”

He also said the benefits of the package will go to only those state power distribution companies fulfilling the mandatory conditions mentioned in the scheme of financial restructuring, approved by the union cabinet on Monday.

A major condition for availing of the benefits of the package is that discoms will have to “rationalise” tariffs for consumers once a year and cut down their transmission and distribution losses by 25 per cent.

“Rationalisation of tariff should take place every year. An order to this effect should be issued for implementation from April 1 of every fiscal,” he said. The ministry will set up two monitoring committees that will see if the boards, or SEBs, were complying with the conditions laid down for the bailout.

Twenty-one states have already done rationalisation of tariff. “So, this has already started taking place,” Moily said. The ministry will 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, he said.

States will be required to enact the legislation within 12 months from the date of the circulation of the model legislation brought out by the Union Ministry to mandate compliance of the provisions of the financial restructuring package, he added.

The restructuring scheme stipulates various measures required to be taken by both state discoms and the state governments for achieving the financial turnaround of the discoms by restructuring their debt. The approved scheme is not mandatory for states. So far only Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Punjab, Haryana and Tamil Nadu have come on board.

The accumulated losses of SEBs are estimated at Rs 2.4 lakh crore. Rajasthan, Uttar Pradesh, Haryana, Tamil Nadu, Punjab, Madhya Pradesh and Andhra Pradesh have accumulated short-term debts of Rs 1.9 lakh crore from power distribution.