Discoms to get monetary incentives in bailout pkg: Sources

The ailing power distribution companies (discoms) have been offered monetary incentives as part of bailout package by the Centre, reports CNBC-TV18 quoting government sources.

The incentive scheme is likely to prevail for three years starting FY13. The cost of incentive to discoms is pegged at Rs 1,500 crore per year, while the cost of incentive to states is pegged at Rs 24,000 crore.

Sources say the incentives will given only if states agree to take half of the discoms short-term liability. The incentives will be a part of transitional finance mechanism (TFM), which will be worked by finance and power ministries.

Sources further add that discoms will get grants for additional energy saved beyond targets. The grant eligibility is linked to cutting cost revenue gap in the first year of the scheme. "The first year cost revenue gap will be 25% lower than the benchmark year FY11," a government source told CNBC-TV18 adding, "the states will be reimbursed 25% of the principal repayment". 

The power department has directed Dakshin Haryana Bijli Vitran Nigam (DHBVN) officials to launch a special drive to recover arrears from defaulters, replace defective meters and check power theft so as to bring down the rate of aggregate technical and commercial (AT&C) losses.

Also the discom bailout mandates states to issue bonds.

Also read: Debt rejig to help DISCOMs become profitable in 3 yrs, says OBC