Recasting of Loans of DISCOMS

A scheme has been formulated by the Government for Financial Restructuring of the State Distributing Companies (DISCOMS) at the national level for restructuring of the short term loans of power distribution companies of the country. The Scheme is available to all participating State Owned DISCOMS having accumulated losses and facing difficulty in financing operational losses. The states who have conveyed their in-principle willingness to participate in the scheme as on 25.4.2013 are Andhra Pradesh, Bihar, Haryana, Himachal Pradesh, Jharkhand, Kerala, Meghalaya, Rajasthan, Tamil Nadu and Uttar Pradesh.

Outline of Financial Restructuring of State Distribution Companies (DISCOMS)

Ø   The State Government will take over 50% of the outstanding short term liabilities (STL) of the DISCOMS as on March 31, 2012. This will be first converted into bonds to be issued by Discoms to participating lenders, duly backed by State Government guarantee. The State Government will then take over this liabilities from Discoms in the next 2-5 years by way of issuing special securities in accordance with their FRBM space. The State Government will provide support in payment of interest and repayment of principal till the date of takeover by issuing special securities.

Ø   The Balance 50% Short term Liabilities will be rescheduled by the lenders at the best possible terms with moratorium on principal repayment.

Ø   The scheme contains two tier monitoring mechanism by committees at Centre and State level to monitor the progress of the turnaround plan.

Ø   Central Government would provide incentive by way of grant equal to the value of the additional energy saved by way of accelerated AT&C loss reduction beyond the loss trajectory specified under RAPDRP and capital reimbursement support of 25% of principal repayment by the State Government on the liability taken over by the State Government under the scheme.

Ø   The scheme contains immediate/ continuing and other measures required to be taken in a time bound manner by the Discoms and State Governments to ensure long term financial & commercial viability of State owned Discoms. These measures include Financial Restructuring, Tariff Setting & Revenue Realization, Subsidy, Metering, Audit & Accounts and Monitoring.