The Government has
notified a scheme for Financial Restructuring of State Owned
Distribution Companies (Discoms) on 05.10.2012. The scheme contains
various measures required to be taken by State Discoms and State
Governments for achieving the financial turnaround of the Discoms by
restructuring their debt with support through a Transitional Finance
Mechanism by Central Govt. The scheme will remain open upto 31st
December, 2012 unless extended by the GOI. Support under the scheme will
be available for all participating State owned Discoms having
accumulated losses and facing difficulty in financing operational
Salient features of the scheme are as under:
a) 50% of the outstanding short term liabilities upto March 31, 2012 to
be taken over by State Governments. This shall be first converted into
bonds to be issued by Discoms to participating lenders, duly backed by
State Govt. guarantee. Takeover of liability by State Govt. from Discoms
in the next 2-5 years by way of special securities and repayment and
Interest payment to be done by State Govt. till the date of takeover.
b) Restructuring the balance 50% Short Term Loan by rescheduling loans
and providing moratorium on principal and the best possible terms for
this restructuring to ensure viability of this effort.
c) The restructuring/reschedulement of loan is to be accompanied by
concrete and measurable action by the Discoms/States to improve the
operational performance of the distribution utilities.
d) For monitoring the progress of the turnaround plan, two committees at
the State and Central levels respectively are proposed to be formed.
e) Central Govt. will provide incentive by way of grant equal to the
value of the additional energy saved by way of AT&C loss reduction
beyond the loss specified under RAPDRP and capital reimbursement of 25%
of principal repayment by the State Govt. on the liability taken over by
the State Govt. under the scheme.
The expected outcomes from the implementation of the proposed scheme
a) Providing comfort to the lenders by securing State takeover of and
guarantee for debt,
b) Bringing about financial discipline in the distribution sector in the
c) Providing a commercial orientation to the functioning of the
d) Casting responsibility on the State Government to ensure a steady
flow of revenue to the distribution companies by improving the
efficiency of their operations,
e) Accelerate the AT&C loss reduction effort of DISCOMs, through
additional incentive from Central Govt.
f) Ensure regular rationalization of tariff to cover cost of service,
g) Gradual elimination of the gap between ACS and ARR,
h) Ensure timely audit of DISCOM accounts
i) Improve the financial health of the Distribution Utilities to enable
them to procure more electricity for meeting their growing demand.
The scheme has been also uploaded on the website of the Ministry.