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Sep 24, 2012 at 01:37pm IST

Cabinet to consider bailout for power discoms

New Delhi: With Trinamool Congress chief Mamata Banerjee out of the Congress-led United Progressive Alliance (UPA), the government is now getting ready to roll out more reforms, starting with the power sector.

A bailout plan for power discoms will be discussed during the Cabinet Committee on Economic Reforms meeting on Monday. The government is likely to propose a three-year transitional finance mechanism, a move which will provide liquidity support by way of a grant to power discoms. The financial implication of transitional finance mechanism will come to about Rs 1,500 crore per year.

The grant will only be given if losses are reduced by at least 25 per cent. There will a separate arrangement for four state electricity boards with the Centre deciding to part finance operating losses of Uttar Pradesh, Rajasthan, Tamil Nadu and Haryana.

According to the power sector bailout proposal states will be required to issue five-year bonds with a 10-year repayment term. The financial implication of bonds works out to Rs 25,000 crore.

The total debt of the power discoms which is to be restructured is Rs 1.9 lakh crore. The states will also have to look at hiking power tariffs as some of the electricity boards have been charging the same rate for well over 15 years.

But politically power sector reforms looks difficult as several states and political parties are vehemently opposed to a hike in tariff.