Central devolutions on line for power reforms

new delhi: the power ministry has moved a cabinet note by which the centre would have a right to block resources earmarked for transfer to the states as central devolutions if the states default on their payments to central utilities for the power bought from them. this is a significant component of the policy package finalised by the power ministry to settle state electricity boards’ gargantuan dues to central utilities. to put this politically tricky proposition beyond the pale of all controversy, the union power ministry is ensuring that the union cabinet clears such decisions entered into with state governments and state electricity boards. andhra pradesh is the first state to sign such an agreement with the centre states’ dues to central utilities amount to over rs 40,000 crore. such build-up of receivables erodes the financial health of the central utilities and makes it difficult for them to continue supplying power to states that default on payments. to find a solution to this problem, the government set up a committee headed by montek singh ahluwalia. the committee suggested a package for one-time settlement of the dues conditional on all fresh bills being paid on time. another committee headed by n k singh fine-tuned these recommendations further. the package available to a reform-minded state government is quite attractive. part of the dues, comprising interest payments, would be waived and the rbi would allow the concerned state government to issue tax-free bonds to finance the settlement of dues. in return, the state government would have to undertake to not only pay all fresh dues as and when they fall due but also agree to divert a part of the state’s devolutions from the centre to meet this obligation, if the state electricity board does not make the payment on its own.