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Web Exclusive | October 2012

Loan restructuring may not help discoms without reforms

Without power sector reforms, restructuring of bank loans given to power distribution companies may not help the borrowers turn around their fortune, Association of Power Producers has said. The government is thinking of restructuring of Rs 1,90,000 crore worth of bank loans given to power utilities in seven states.

The seven states include Madhya Pradesh, Rajasthan, Tamil Nadu and Uttar Pradesh as they face losses and are not in a position to rapay loans. Ashok Khurana, director general of Association of Power Producers said that financial restructuing needs to be associated with commercial discipline and corporate governance.

Malay Kumar De, West Bengal's power secretary agreed. The restructuring will not work if the fundamental issues are not addressed. So, this will ultimately turn into non performing assets, he added. Most of the government-run power utiliies are running into losses as they are not allowed to raise tariff due to political compulsions.

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