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Centre to waive Rs 94.48 bn to settle SEB dues

Under pressure from states for more concessions, Centre on Friday decided to waive about Rs 94.68 billion from the Rs 414.73 billion dues of state electricity boards towards central PSUs, while issuing bonds for the remaining as part of revised formula for one-time settlement of the outstanding.

As per the revised formula, the PSUs would have to forgo about Rs 15 billion more as the Centre decided to waive 60 per cent of the interest surcharge of Rs 157.46 billion as against 50 per cent waiver offered earlier.

"All states have agreed to the revised formula which will be implemented immediately," Power Minister Suresh Prabhu told reporters after the meeting of the Empowered Group of Chief Ministers.

Besides, incentive on payment of all dues has also been increased by 1 per cent. As per the new formula, 6 per cent incentive would be given in the first year, 5 per cent in second year and 4 per cent in third year.

"This would entail an additional forgo of Rs 5 billion," Minister of State for Power Jayawanti Mehta said.

However, states like Madhya Pradesh demanded full waiver of the surcharge as states were in a difficult situation.

Besides Finance Minister Yashwant Sinha, Power Minister Suresh Prabhu and Planning Commission Deputy Chairman K C Pant, Madhya Pradesh Chief Minister Digvijay Singh, Orissa Chief Minister Biju Patnaik and Haryana Chief Minister Om Prakash Chautala, and energy ministers of Rajasthan, West Bengal and Gujarat attended the meeting.

National Thermal Power Corporation would take a beating of about Rs 98.50 billion on the new settlement formula.

"SEBs owe us Rs 182.51 billion. Sixty per cent waiver of surcharge and one per cent additional incentive bonus on one-time settlement of dues would mean a forego of Rs 98.50 billion," NTPC Chairman C P Jain said.

The meeting saw several states voicing concern over the settlement formula proposed by Montek Singh Ahluwalia Committee on the grounds that it would add to their fiscal deficit and reduce their borrowing capacity.

"Liability (of bonds repayment) will have to be borne by the state government or SEB which will only add to financial difficulties of the states," the Madhya Pradesh chief minister said while demanding 100 per cent waiver of surcharge.

Singh said: "We share the view that SEB outstandings have to be tackled, but the liability has to be equally shared by the states and Centre."

Prabhu, on the other hand, said Centre was extending a helping hand to the states by way of settlement of dues. "But for our help, this (over Rs 410 billion dues) would have been liabilities with the SEBs which otherwise would have to be settled bilaterally," he said.

Minister of State for Power Jayawanti Mehta told reporters after the meeting that the states have agreed to issue of bonds for the remaining amount.

The Ahluwalia committee had recommended one-time settlement of Rs 414.73 billion by way of 50 per cent waiver of interest and securitising the remaining Rs 336 billion through tax-free bonds bearing an interest rate of 8.5 per cent.

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