Converting discom loans to state bonds can help: Haryana

The losses of power distribution companies in Haryana surged to Rs 29,362 crore in financial year 2014-15, raising concerns of default on loan repayments. Earlier, Finance Minister Arun Jaitley had said states cannot expect public sector banks to fund the deficits faced by power distribution companies due to levy of inadequate tariffs.However, Haryana additional chief secretary (power) Rajan Kumar Gupta told CNBC-TV18 that the restructured package and restructured loan will help payment to the banks, thus ruling out a possibility of a default. Besides there are proposals like converting central government loans into state bonds as a measure to reduce discom losses. Power Discoms had received its entire share of subsidy from state last year, Gupta informed.Below is the transcript of Rajan Kumar Gupta's interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy. Latha: If you can tell us whether the Haryana discom is making losses, are the incomes of the Haryana discom less than their expenses? A: We are into losses. Our accumulated losses are currently of the order of about Rs 29000 crore which were at Rs 26500 crore as on the beginning of the last financial year. So, we have accumulated additional losses in the year 2014-15. However, with the restructured package and restructured loan we are not defaulting in repayment to the banks in any manner. So, we are supplying electricity and we have liquidity to meet our expenses but accumulated losses are a matter of concern.Sonia: Have you received any letter from the Reserve Bank of India (RBI) on account of your defaults or your precarious financial situation? A: No, we have not received any letter from RBI. We are not defaulting the repayment of our loans. We are not defaulters in any manner with any of the institutions.Latha: Is there a likelihood that you may default on your loans, that your loans may turn to NPLs? A: It is going to be a long period before the losses come in control because variety of factors are contributing to it. Some of those factors will be controlled over a very long period of time. However in the meantime we have neither been defaulting nor are we likely to default. Our liquidity position is forecasted to be strong enough to allow continuous functioning without any interruption.Sonia: Is your government and the central government planning a scheme to lower your discom losses in anyway? A: Central government is in the process of discussing various aspects of reducing the losses of the discoms because it is eventually the losses of discoms which is weighing on the entire power sector. We have to reduce the losses in the interest of health of the power sector and whole of the country. So, central government is working out various options, exploring what all could be done. They are in discussion with various states including Haryana but no final proposal has yet been formulated.Latha: Can you give us some idea of the contours of the plan that the central power ministry is discussing with the states, what are you all working on? A: There are varieties of ideas. Unless a policy framework comes through which has consensus of all the states and which has the approval of the finance ministry and the union cabinet, till that time I don't think it will be appropriate to say as to what are the issues. There are variety of issues, some of which are possible to be implemented, some of the issues will need lot of modification in certain laws and rules and instructions. It is at the exploratory stage as to what all is possible.Sonia: Has your state government cleared all its subsidy related obligations towards the discoms? A: We have been getting the subsidy meant for specific years. For example, last year we got our full subsidy portion. In the current year we are getting the entire money which is due from the state government towards the subsidisation of power supply to the agriculture sector but there are certain accumulated overdues pertaining to the previous year which state government has agreed to give but as and when sufficient surplus is available.Latha: What we heard was that the central government is suggesting that some of the discom loans be converted into state government loans or state bonds. Can you elaborate on that? A: That is one of the proposals under consideration but it will need to go through various processes at the central government level. However state government would be happy to get this loan converted into bonds or something.