Debt rejig to help DISCOMs become profitable in 3 yrs: OBC

Q: Just give us a sense in terms of when this restructuring will come into play and what can we expect in terms of the current exposure that you have and possible restructuring which you would undertake at this point in time with regards to your exposure?

A: The plain restructuring have already been done by most of the banks. For example, in our bank we have done it for Haryana, we have done it for Rajasthan and we have also done it for UP. Maybe in the next quarter we will be doing it for Punjab also.

But the new restructuring which I am talking, where the 50% of the loan which is already on my books will be taken over either by the state government or any of the PSUs in the form of by floating a bond in the market and the proceeds of the bond will come to me. Then naturally my loan book will come down by 50%. But of course I will be funding the future losses for the remaining two years - 70% for the first year in 2012-13 and 35% of the losses in 2013-14.

Q: What do you mean by funding the losses? You will give them more loans?

A: Naturally. There is a gap between the revenue and the cost. Whatever is the gap, they will present a total picture to the bankers in the presence of ministry and then we will arrive at a conclusion that these are the realistic figures taking into account the projected revenue by factoring in the revision on tariff. Then 70% of those losses which are being arrived at will be funded by the banks, 30% will be funded by the state government. Naturally all these future loans as well as the present loans which are in my books will be guaranteed by the state government.

Q: What if DISCOMs don’t bring down the difference between cost and revenue? Do you have the power to call off the arrangement if you don’t find that kind of progress?

A: For the Rs 1 loss that I was talking about with regards to Haryana, the state government has already initiated various steps and the power tariff has been revised upwards twice in the last one years time. If they don’t fulfill their commitment, then naturally I am not obliged to fulfill my commitment; I will stop funding the losses. Worst is behind us, we have come to a negotiating table and we are discussing. I think everybody - state government, central government, banks - is interested in finding out a solution.

One more important thing is with respect to wherever the agriculture power is provided free of cost by the state government. There is again a clear cut understanding between the bankers and the central government and the state government that this 100% subsidy will be provided for in the annual budget of the state government. So hence forth there will be no populist measure as far as power is concerned. If the government is announcing any free work, then it will be declared it in the budget and will be fully provided. So to that extent there will be complete transparency.