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Panel urges overhaul of SEBs' dues

A panel of experts advising the government on ways to reform the ailing power sector has suggested a major restructuring of outstanding dues of state electricity boards.

The poor financial health of the state electricity boards, expected to run up combined losses of Rs 285.45 billion in 2001-02, has been a big obstacle in India's efforts to lure private investment into its power sector.

The state government-owned boards owed central power utilities Rs 414.73 billion in outstanding dues on February 28. The dues consisted of Rs 257.27 billion in principal and Rs 157.46 billion in interest.

The panel suggested that half the outstanding interest amount be waived and state governments securitise the remaining interest amount and principal worth Rs 336 billion by issuing bonds.

"The bonds shall be of 15 years tenor, issued through the RBI at a tax-free interest rate of 8.5 per cent per annum," the panel said in a report submitted to the union power minister.

"The bonds may be structured to achieve a moratorium of five years on repayment of principal with the entire principal being repaid between the sixth and the 15th year," it said.

The panel suggested the bonds be issued with lock-in conditions that allow the release of only 10 per cent of these instruments into the market every year.

Union Power Minister Suresh Prabhu told a news conference the government would study the panel's suggestions and make a decision by July 1.

The panel was set up in March after a meeting of Prime Minister Atal Bihari Vajpayee with state chief ministers and power ministers in which he asked them to speed up power reforms.

Its members included Rakesh Mohan, an adviser to the union finance minister, the heads of financial services firm ICICI Ltd and home mortgage company HDFC, and central and state government officials.

The panel also suggested steps to reward SEBs pursuing reforms and penalties for those that did not clean up their operations.

"The states that do not consent to the scheme within 60 days after this scheme enters into force shall be denied any share in the discretionary allocation of 15 per cent from the power stations of CPSUs (federal power utilities)," the panel said.

"If the overdues of such states exceed Rs 500 million, they shall also attract reduction in power and coal supplies," it added.

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