There’s a popular T-shirt slogan, “It’s déjà vu all over again.” It might as well have been a commentary on the Indian power sector and what ails it. In 2001, based on the roadmap drawn by the Montek Singh Ahluwalia committee, the government outlined a bailout package for cash-strapped state power utilities. The intention was to ensure that the dues owed to central public sector enterprises such as NTPC, NHPC and Coal India, amounting to over Rs.41,000 crore, were repaid.
For its part, the Centre pitched in by waiving almost 50% of the interest due. The remaining 50% plus the principal due — another Rs.33,000 crore — was to be securitised through tax-free bonds issued by the state governments. There was also a five-year moratorium on the repayment of principal.
Of course, there were strings attached. States that availed this bailout had to mandatorily change their attitude towards the power business. They would have to follow a milestone-based reform programme that included measures such as setting up regulatory commissions, metering power supply, improving revenue collection and so on.
Eleven years after the initial plan was announced, the accumulated losses of the state power utilities is now close to Rs.1.9 lakh crore. And now there’s another bailout package, announced by the Centre in September, a similar scheme with bonds worth Rs.60,000 crore and a moratorium on principal repayment to be issued by the state governments. The first attempt was a big flop. The question is: will it work this time around?
Then and now
Essentially, this is the current plan: state governments will take over half of the short term loans of discoms as on March 31, 2012 and convert them into long-term bonds. They will also stand guarantee for the remaining half, which banks will reschedule to longer repayment tenures as well as give a moratorium on repayment of principal. And, just