New Delhi, Sept. 25: State electricity boards must commit themselves to power tariff hikes and other performance-enhancing measures such as privatisation of distribution and pre-paid metering for government consumers before they can avail themselves of the Centre’s debt recast package that was announced yesterday.
“Tariff rationalisation should take place annually… It (package) is performance linked and SEBs (state electricity boards) should take concrete measures to improve operational performance,” power minister Veerappa Moily told reporters here.
The minister added that the revised tariffs must be announced by the April of each financial year.
Other conditions include adjustment of tariffs to fuel cost, upfront payment of subsidy by state governments and installation of prepaid meters by March 31, 2013 for all government consumers.
Besides, private parties must be involved in distribution through franchisee arrangements, or otherwise, which must be prepared within a year. Also, there should be targets for progressive reduction in short-term power purchase by the state distribution companies.
The minister said audited accounts till the financial year 2010-11 must be submitted by this month; accounts for the last fiscal must be in place by December.
Two committees will be set up to monitor the performance of the state electricity boards.
Under political pressure to sell below cost and losing more than a quarter of supplies to theft and transmission and distribution losses, state distribution companies have been borrowing for years to fund their losses.
Their accumulated losses are estimated at Rs 1.9 lakh crore as on March 31, 2011, and Rs 2.46 lakh crore as on March 31, 2012.
Moily said the BJP-led NDA government, too, had offered a bailout in 2001-02, but that turned into a “death trap” because it was not linked to performance.
The Cabinet Committee on Economic Affairs yesterday approved a package for the financial restructuring of the distribution companies.
“The ministry of power will bring out a draft state electricity distribution responsibility bill after due inter-ministerial consultation within a period of 12 months from the approval of the scheme,” Moily said.
He said the states must enact the legislation within 12 months from the date of circulation of the model legislation.
“They will have to implement legislation within a year. We don’t want it to see the same fate as the 2001 discom restructuring plan.”
Under the debt restructuring package approved by the Union cabinet, the state governments should convert all their loans to equity; all the outstanding energy bills of the state departments or agencies as on March 31, 2012 are to be paid by November 30.
According to the bailout package, proposed by the power ministry, states will take over half the outstanding loans of SEBs and convert them into bonds that will be issued to the lenders and backed by state government guarantees.
The lenders are to restructure the remaining 50 per cent and provide a three-year moratorium on principal repayments.
The package is open for acceptance by states till December 31 and is not binding on them. So far, only seven states — Rajasthan, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Punjab, Haryana and Tamil Nadu —have come on board, Moily said.