Tuesday, 9 October 2012

Government notifies scheme for Financial Restructuring

New Delhi:(Page3 News Network)-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 losses. 
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 would: 
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 State, 
c) Providing a commercial orientation to the functioning of the distribution companies, 
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. (http://powermin.nic.in/)

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