The Cabinet Committee on Economic Affairs on Thursday approved Power Ministry's proposal of amending the debt restructuring package for electricity distribution companies (discoms).
As per the proposal, the state electricity boards of Jharkhand, Bihar and Andhra Pradesh would be allowed to convert their outstanding loans till March 2013 into bonds as part of an amendment to the discom debt restructuring package.
These states had approached the Power Ministry seeking this special provision to extend the date by a year.
Sources said the proposal (amendment to the financial restructuring package) has been cleared.
Under the current Financial Restructuring Package (FRP), which was approved by the government last year, 50 per cent of the accumulated debt of the discoms till March 2012 can be converted into bonds.
These bonds will be issued by the distribution companies to the participating lenders, backed by state government guarantees.
The balance 50 per cent loans will be restructured by providing moratorium on principal and best possible terms for repayments.
The support under the scheme is available for all participating state-owned discoms on fulfilling short-term mandatory conditions.
The accumulated losses of state power distribution companies were estimated to be about Rs 1.9 lakh crore as on March 31, 2011 and Rs 2.46 lakh crore as on March 31, 2012.
An official statement said the CCEA has approved amendments to the scheme for Financial Restructuring of state distribution companies.
"...to enable these three states (Jharkhand, Bihar and Andhra Pradesh) for participation under the scheme, the cutoff date for reckoning the eligible amount of short term liabilities for issuance of bonds/reschedulement by lenders is now shifted to March 31,2013 from March 31, 2012," it said.
The utilities of these states were facing financial difficulties and were keen to participate in the scheme but could not do so due to practical difficulties in meeting certain requirements.
Implementation of the scheme in these states will help provide comfort to lenders by securing state takeover of, and guarantee for, debt besides bringing about financial discipline in the distribution sector.
It will also help provide commercial orientation to the functioning of discoms and casting responsibility on state governments to ensure a steady flow of revenue to them by improving efficiency of their operations.
It will accelerate the Aggregate Technical and Commercial loss reduction effort of discoms, through additional incentive from the central government.
This will result in ensuring regular rationalisation of tariff to cover cost of service and also ensure timely audit of discom accounts.
It will improve the financial health of distribution utilities to enable them to procure more electricity for meeting growing demand.
The Centre had notified the Financial Restructuring Plan for state-owned distribution companies through an order issued on October 5 last year.
The scheme is being implemented in Tamil Nadu, Rajasthan, Uttar Pradesh, Haryana and Himachal Pradesh. It will be available to these states up to December 31, unless extended by the Centre, the statement said.