It aims at achieving turnaround for debt-trapped utility in 3 years

The State Government has approved a financial restructuring plan for the Tamil Nadu Generation and Distribution Corporation (Tangedco) aimed at achieving a turnaround for the debt-trapped power utility in three years.

This is line with the Centre’s scheme for financial restructuring of power distribution companies.

An immediate impact of the development is that banks will fund 70 per cent of the Corporation’s estimated loss for the current year with the State government meeting 30 per cent as subsidy.

As per an estimate, the cash loss this year is Rs. 8,183 crore, of which about Rs. 5,730 crore will be covered by the banks.

As part of the plan, short-term liabilities of Tangedco, as on March 31, 2012, would be recast. They have been estimated as Rs. 24,422 crore, of which 50 per cent would be absorbed by the State Government and the remaining 50 per cent rescheduled with a three-year-long moratorium on the payment of principal.

As for the portion of the liabilities to be taken over by the government, Tangedco would initially issue bonds to participating lenders with the State government’s guarantee. Gradually, in five years, the bonds would be converted into special securities of the government, keeping in view the fiscal space available.

The Centre’s supportive role would be in two ways – reimburse 25 per cent of principal payment of the bonds or the special securities and provide grant equal to the value of energy saved in the reduction of aggregated technical and commercial (AT&C) losses, subject to certain conditions.

An order issued by the Energy Department a few weeks ago also stated that if annual projections in the financial restructuring plan were not achieved, the State Government would underwrite the shortfall as equity or interest-free loan on annual basis.

To review the progress of implementation of the plan, a committee headed by the Chief Secretary has been constituted. Apart from senior government officials, the committee includes representatives of lenders such as State Bank of India, UCO Bank and Central Bank of India. The Reserve Bank of India and the Central Electricity Authority would also be represented on the committee.

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