Govt offers Rs 26,000 cr deal on power dues

Govt offers Rs 26,000 cr deal on power dues
ENS ECONOMIC BUREAU

NEW DELHI, MAR 3: The government has offered a one-time settlement of the huge outstandings of around Rs 26,000 crore of the State Electricity Boards (SEBs) to Central PSUs. This one time settlement will be applicable only for those states who agree to adhere to a time-bound reforms programme to prevent future losses.

Speaking at the chief ministers’ conference on power sector reforms in the Capital on Saturday, the Union finance minister, Yashwant Sinha said, an expert group would be set up to recommend a one-time settlement of all power sector dues to CPSUs and dues from CPSUs to state power utilities.

The group, he said, would give its report within three weeks of its constitution. The exact constitution of the group will be decided sometime next week but it is expected to comprise of representatives of the state governments, PSUs, financial institutions and the Centre. “One time settlement of the dues would be possible, provided the chief ministers agree for a time-bound programme of reforms and sign a MoU with the Centre to this effect,” said Sinha. The finance minister informed that the one-time settlement of dues will be in addition to the securitisation package proposed by him earlier.

Sinha warned that lack of reforms in power sector will create enormous problems for development. “This one-time settlement for clearing the backlog of SEBs can yield results only if the boards start breaking even and posting profit in future. There can be no conviction if they slip back after clearance of the burden of backlog,” Sinha cautioned.

Referring to ‘horrendous’ figures about the financial health of SEBs and power sector, Sinha said, “There was a very serious mismatch between rising cost and realisation.” The reforms, he said, must begin with distribution sector and then we can go back to generation and transmission. Earlier, inaugurating the conference, Prime Minister Atal Bihari Vajpayee asked the states to revise agriculture tariff to raise it to at least 50 per cent of the average cost in three years. Vajpayee regretted that there were many other categories of users who get electricity for free or at highly subsidised rates in the name of agriculture.

Sinha said the government cannot avoid the issue of user charges anymore. All SEBs are showing huge losses and backlog and that it was not the states’ problem alone anymore. “It is now affecting the central power utilities,” Sinha said. The finance minister also assured the chief ministers that resources will not stand in the way of reforms. “We can find money. There will be no need for guarantees and counter guarantees if states take up reforms,” he said.

The same was endorsed by the Deputy chairman of the planning Commission KC Pant who later told the participants that unbundling of SEBs was not enough in the name of power sector reforms and the finance minister’s proposal for one-time settlement of their outstandings had given the states another, but a final chance of sorting out the problem collectively.

Pant said that it was imperative for both the Centre and the states to bring back the power sector back on the rail before commencement of the 10th five year plan from April 2002, failing which nine per cent or above growth target were not feasible. Emphasising on the reform process, the Prime Minister said, “We should have focussed on reforms in distribution before, or at least simultaneously with, those in generation”.

The priority should be to make distribution commercially viable so that it could boost private investors’ confidence in generation and transmission projects, Vajpayee said adding, “We should also enable some independent power producers to achieve financial closure at the earliest. Vajpayee said the comprehensive Electricity Bill would be introduced in Parliament in the current session and its enactment would provide a egal framework for state governments to undertake reforms in the power sector.

Complementing the government of Orissa for having taken far-reaching steps in this process, Vajpayee said that the Centre has also taken many steps to support reforms being attempted by the state governments.

He also mentioned that the approach of guaranteed returns to the private power producers resulted in an unacceptably high power tariff. The Dabhol power project in Maharashtra is a notable example.