Discom bailout: States oppose conditions, want amendments

Govt's ambitious plan to restructure state electricity boards (SEBs) and make them debt free seems to have hit a road block. States interested in the scheme had to come on board by December 31 but the power ministry has now extended the deadline by three months owing to objections raised on some proposals by the states. CNBC-TV18’s Sumit Jha reports what happens to the scheme and discoms whose accumulated losses stand at Rs 1.9 lakh cr.

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The objections raised by states can broadly be divided into three points. The states are not too happy with the borrowing limit that they have and want it to be enhanced.

According to sources states think that it will be difficult for them to stick to Fiscal Responsibility and Budget Management (FRBM) limit if they continue with the same borrowing once they start paying interest on the bonds they have issued.

Secondly the SEBs want the incentives that the centre promises along with this scheme to be given to them upfront and not at the end of the cycle of the scheme. The scheme says that the centre will reimburse 25 percent of the principal repayment of the state once they take the entire 50 percent of the burden of the discom.

The third point that the states are not too happy about is the metering of the entire population. According to them, they cannot do it in the time bound manner that the scheme wants. So, as things stands now the deadline has been push back by three months, but if they are a major changes it will have to be approved by cabinet again.