Karnataka to seek discom debt recast

The Karnataka government is considering availing the Centre's R1.9-lakh crore debt restructuring facility for its power distribution companies (discoms) and examining the key terms and conditions of the plan.

The state has communicated to the Union power ministry that it is studying the plan and will get back soon with a formal decision. "We have been informed by the Karnataka energy department that government-level consultations on the issue are currently under way and the decision will be communicated to the Centre soon" a senior power ministry official told FE.

Until recently, Karnataka, whose discoms have unpaid short term loans of about R8,000 crore, had not shown any interest in joining the Centre's transition financial mechanism for debt-ridden discoms.

Seven states—Tamil Nadu, Andhra Pradesh, Rajasthan, Punjab, Haryana, Uttar Pradesh and Jharkhand—have already expressed interest to avail the facility. If Karnataka also comes on board, the total number of states willing to join the scheme will become eight.

States are required to submit their financial restructuring plans by the end of this year to avail the facility. They will also have to commit to implement key power sector reforms in a time-bound manner as a precondition.

The Centre had also provided a R43,000-crore financial package in 2002-03 under similar circumstances to save the state power distribution sector from a financial collapse. The states had committed to undertake reforms but failed to honour their commitment for fear of political backlash. Hence, the second bail-out.

To ensure that states do not backtrack on their reform commitment this time, the Centre has mooted regular monitoring of progress against key reform milestone specified for states. Monitoring committees at the central and state level will review the progress on a quarterly basis.

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