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Last Updated : Jun 24, 2015 03:22 PM IST | Source: Moneycontrol.com

Rajasthan SEB recast: Low interest, 5-yr moratorium sought

Rajasthan is best placed to ensure power supply the state discoms peak energy deficit of 0.1 percent is among the best in the country.

Rajasthan State Electricity Board (RSEB) is reeling under falling power demand, forcing it to seek a second round of restructuring of its Rs 55,000 crore debt. Speaking to CNBC-TV18, Sanjay Malhotra, secretary of power in the Rajasthan government clarifies that most of the restructuring relates to loans of distribution companies. The government has also issued tender for refinance and swapping of various loans to to reduce interest rates. The board is looking at moratorium of 5 years with a reduced rate of Interest as part of restructuring

RSEB consists of three distribution companies namely Jaipur Vidyut Vitaran Nigam, Ajmer Vidyut Vitaran Nigam, and Jodhpur Vidyut Vitaran Nigam. The other two —Rajasthan Vidyut Utpadan Nigam and Rajasthan Vidyut Prasaran Nigam are into generation and transmission, respectively.

RSEB incurred a loss of Rs 10,643 crore in 2013-14, while losses for FY15 currently stands at Rs 13,100 crore . Losses in the T&D segment have remained largely static and have not seen much improvement. Malhotra informed that the state is best placed to ensure power supply and Rajasthan discoms peak energy deficit of 0.1 percent is among the best in India. He said projects worth 4,500 MW will come up for generation in the next two years.

Below is the transcript of Sanjay Malhotra’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.

Latha: Rajasthan State Electricity Board (SEB) was one of the beneficiaries of the previous financial restructuring that was done I think in 2013. The latest numbers I have of various SEBs in Rajasthan is Rajasthan Vidyut Utpadan total loans of Rs 22,000 crore, Rajasthan Vidyut Prasaran that is transmission but that is Rs 8,800 crore, Jaipur Vidyut Vitran is Rs 3,5000 crore, Ajmer Vidyut is another Rs 21,000 crore and Jodhpur Vidyut another Rs 21,000 crore – total loans of Rs 97,674 crore. Are you asking for a recast of all these loans?

A: Yes and no. We are asking for a recast of the loans in so far as the distribution companies are concerned. I am happy to say that the government of India has now recently setup a committee to look up this matter and the first meeting of that committee is scheduled for July 3rd.

Latha: This doesn’t fit with the Reserve Bank of India (RBIs) policy isn’t it? Any further restructuring of loans will be done only after those loans are taken in as non-performing loans (NPLs). The bankers are agreeable to your proposal or do you have a way of sidestepping this?

A: In so far as the restructuring is concerned, we will have to take RBI along. I am sure government of India will be in touch with RBI to sort this out. However, apart from restructuring, we are also looking at if you would have noticed in the papers, we have issued a tender for refinance and swapping of the various loans. So, when you are talking about this Rs 99,000 crore it is not the total loan that we are wanting to restructure, part of it is also we are proposing to refinance or swapped. So, we are looking at various innovative options to come over this problem.

Reema: It has just been two years since your first restructuring and already the SEB is asking for another round of restructuring and you are making still pretty heavy losses. Can you tell what has been the actual tariff increase that you’ll have effected in the last two years versus how much you were required to take as a part of your financial restructuring plan (FRP)?

A: The FRP that was initiated sometime ago, FY13, actually it was supposed to be a three year program. However, we feel that even those three years very short period to do financial turnaround of the whole distribution sector. However, we didn’t even get three years. The guidelines were issued only in October in 2012 whereas the program was to start in April 2012. The negotiations with the banks took another a year. So, one actually got only about 18 months to do the FRP. So, that was too short period to actually turnaround the whole sector.

In so far as your question of the conditions that were laid down for us, for the government as well as for the distribution companies, I am happy to state that most of the conditions were met by the state governments and the distribution companies. The tariffs have been hiked for the last four years regularly. FY11 we hiked it by about 19 percent followed by a 13 percent plus increase in FY13. Again there was an increase and last year again there was an increase of about 17 percent. So, in the last four years we have almost doubled our tariffs.

Other conditions like taking over of the bonds by the government, paying interest by the government on those taken over bonds is also being done. Loan has also been converted into equity by government of Rajasthan and so there is a lot of support coming in from government of Rajasthan, through the distribution sector. The distribution sector on its own part is also making a number of efforts under the able leadership of our Chief Minister now to basically revive this whole sector.


Latha: Can you tell us what exactly are the losses or profits as of FY15 totally for all the electricity distribution companies?

A: FY13-14 we had a loss of about Rs 15,650 crore or so. Happy to state that last year we were able to bridge this gap by Rs 2,500 crore and bring it down to Rs 13, 100 crore. So, when you are looking at numbers so huge as this, you would appreciate that a three year FRP that was given to us sometime two years ago was too short a period to actually be able to turn the whole sector around

Latha: What is the T&D and AT&C losses of again the two years that you are talking about FY14, FY15?

A: More or less they have been static that is one area of concern for us now. We have taken a number of proactive steps. While our CM does believes that whatever approach we take it has to be consumer centric, so, while we improve consumer satisfaction we are looking reducing our costs. T&D cost is one of the major players over there. So, we are taking a number of steps to reduce the T&D and the AT&C losses.

The AT&C loss comprises T&D losses and the collection losses. Collection losses we are very good, we are amongst the best in the country with 99 percent plus. T&D losses is an area of concern and now we have initiated a whole program of reforms right down up to the feeder level where we have already appointed managers for each and every feeder. So, our whole program basically involves improvement in quality of supply while enhancing efficiencies and increasing accountability of the people at each and every level.

Latha: Just a number if you can, is it 25 percent or 30 percent. What are the T&D losses at the moment?

A: The T&D losses are about 26 percent as of FY14-15. We are getting a third party energy audit done. This is a regular feature that we do but we believe it should be around that figure.

Sanjay Malhotra
Sanjay Malhotra
Energy Secretary, Rajasthan Government|Rajasthan Government

    Reema: Which are the banks which have exposure to the loans of the Rajasthan SEBs and have you been in conversation with any bank, are they agreeable to a second round of restructuring?

    A: There are three consortia of banks for the three distribution companies that we have and in all there are 26 banks involved. The lead bank for the Jaipur Distribution Company is Central Bank of India, Bank of Baroda is the lead banker for Ajmer Vidyut Vitran Nigam and then we have Punjab National Bank. So these are the three major banks. We are in touch with them and apart from restructuring, as I mentioned to you we are also looking for a reduction in rate of interest separately from the FRP. We are in constant dialogue with them; they are very appreciative of our idea. They are very happy to note that we have made improvements over the last year or so and there is a positive outlook that they can see. They can see lot of energy under leadership of our Chief Minister.

    Happy to share with you that last year we were able to improve our revenue realisation and recover our costs; an improvement of seven percentage points whereas in FY13-14 we were recovering only 60 percent of our costs. Last year we did about 67 percent. This year we are hoping to touch 80 percent. So, the banks have also started being appreciative and they have agreed to reduce the rates of interest and match it with the lowest of the bank in that consortium. So, that should also help us going forward.

    There are various steps, basically a strategy involving reduction in our costs, power purchase is the major driver over there. About 50 percent of our total cost is power purchase, about 20 percent of our total cost is interest and Transmission and distribution (T&D) losses, again is a huge cost. So, we are looking at all the cost drivers and trying to reduce those costs.

    Latha: You said that in FY14 you’ll had 60 percent cost recovery and FY15 it was 67 percent cost recovery. I would assume that that 40 percent which you did not recover is coming from the state? What is the state’s share, what is the subsidy amount that they ought to be paying anyways?

    A: The state has been helping this sector very much and the subsidy bill this year is going to be the largest for our state because of historical reasons. So, the total financial support if I may say for all the five companies including the generation companies is about Rs 18,000 crore of which the distribution companies themselves account for about Rs 15,000 crore. Of this, the tariff subsidy is about Rs 8,000 crore this year. So, we are looking at very large numbers you can see over here and government of Rajasthan is also supporting us in a big way.

    Latha: How much of this was actually paid out last year, was the entire subsidy amount paid out or were there regulatory assets which you have to recover?

    A: They have paid all the subsidies and they are paid in advance. Every month whatever is the total subsidy that is budgeted for, that is actually paid.

    Reema: Is power demand an issue at all because what we are picking up is that no state is issuing any new power purchase tenders, can you give us a sense of what is the kind of power which has been purchased by the Rajasthan electricity boards and how would it compare to say the prior years?

    A: Let me share some good news with you. Rajasthan, whereas financially we may be having some issues but on the power supply position we are amongst the best placed in the country. Our peak energy deficit is only 0.1 percent the national average as per 2013-14 figures was 4.5 percent. Going ahead we have already about 4,500 megawatts of projects under construction mostly in the state sector and some of which, about 1,000 megawatts in the central sector. So, very shortly within this 12th plan year period we should be a power surplus state. So, we have never compromised on quality as well as availability of power while we have these financial issues.

    Latha: So, you are therefore not signing any fresh PPAs with any private guys, any independent power projects (IPPs)?

    A: In the long-term there was a tender for about 500 megawatts recently, so, that is under process. In fact it was 1,000 megawatts later brought down to 500 megawatts, so, that is under process with the regulators. Depending on the outcome of the regulators decision, we will take a call over there. Long-term of course we may need some PPAs but as of now we are very comfortable as I mentioned with about 4,500 megawatts of projects lined up, under execution and going to come up in the next two years or so.

    Latha: If you can just tell us the main points of the restructuring package?

    A: As I mentioned to you last time, the FRP was a very short period. So we are requesting for at least a five year moratorium this year with about Rs 13,000 crore of annual deficit. We need about five years of moratorium and operational funding for these five years at of course a decreasing rate and then also a reduction in the rates of interest.

    Latha: You are in touch with the Central Power Ministry, with Piyush Goyal’s ministry, they are negotiating the package with the banks?

    A: That is right, they have set up as I mentioned a committee under the Chairmanship of Secretary Power, government of India and the first meeting of that is scheduled to be held on July 3rd.

    First Published on Jun 23, 2015 10:23 am