Government to revive sick power distribution companies: Finance Ministry

MUMBAI: Jayant Sinha, minister of state for finance has said that government is committed to revive the sick power distribution companies even as the Reserve Bank of India today said that banks are staring a loss Rs 53,000 crore on their exposure them due to their weak financials.

Sinha said that since the government is committed to provide 24x7 power to all across India and the only way to do so would be to revive the distribution companies.

"We're quite familiar with the issues of the distribution companies. Historically, these problems have been dealt with through various means between the state government, RBI and central government. There have been tri-partite agreements. Because we've made a commitment to the people of india that we'll provide 24x7 power, I think it is incumbent upon us to find solutions to these issues that are there in power and distribution," Sinha said speaking at a seminar on 'Alternative Financing Structue' organised by Edelweiss and Wells Fargo.

Sinha did not elaborate on what the government to resolve the crisis at distribution companies which have suffered heavy losses. Bankers say that discoms of Haryana, Tamil Nadu, Uttar Pradesh, and Rajasthan are under financial stress.

However, the Financial Stability Report released today said 'Banks have restructured around Rs 53000 crore of the seven distributions companies’ exposure under Financial Restructuring Plan (FRP). The moratorium period for repayment of the principal amounting to rs 43000 crore ended by March-2015. Considering the inadequate fiscal space, it is quite likely that the state governments might not be in a position to repay the overdue principal/ installments in time and banks may be forced to continue classifying these loans as SMA-2 as is being currently done on account of delayed servicing of interest. Probability of slippage of this exposure into NPAs is very high considering the implementation of new regulatory norms on restructuring of loans and advances effective April 1, 2015.'
The central govertment, RBI and respective state government had implemented FRP in 2013 to revive discoms that were facing financial stress.