Budget 2013 hints at Power sector revamp

BHUBANESWAR: The union budget has tried to address the major issues of power sector by urging state governments to prepare financial restructuring plans for Discoms - the weakest link in the private sector.

The Cabinet Committee on Economic Affairs had earlier approved a Scheme for Financial Restructuring of State Distribution Companies. The Scheme contains various measures required to be taken by State DISCOMs and State Govt for achieving the financial turnaround of the DISCOMs by restructuring their debt with support through a Transitional Financial Mechanism by the Central Govt.

The features of the FRP Scheme include the following, 50% of the outstanding short-term liabilities as on March 31, 2012 to be taken over by the State Govt. This shall be first converted in to bonds to be issued by DISCOMs to participating lenders duly backed by the State Govt. guarantee.

Remaking 50% of the short-term liabilities will be re-scheduled by lenders and serviced by the DISCOMs with moratorium of 3 years of Principal. Re-payment of Principal and Interest be fully secured by the State Govt. guarantee.

The Finance Minister in his Budget speech, 2013-14 has further pronounced to strengthen the above Scheme across the States. But the problem in Odisha is that the State has a Single Buyer Model with all the liabilities being their with the Bulk Supplier (i.e. GRIDCO).

The DISCOMs have zero or negligible liability on Power Purchase front (if we exclude the securitized component of PowerPurchase dues).