The Centre is considering a financial bailout package to distribution companies (discoms), which are grappling with huge losses, Power Minister Shshil Kumar Shinde said here on Thursday.
As part of the second phase of reforms in the power sector, the Chaturvedi Committee had raised concerns over the massive losses being incurred by State distribution companies and the need to take steps to set the situation right.
“The precarious financial position of discoms has raised concerns over possible default in the banking system. A financial bailout package is in the consideration of the government,'' he told a press conference.
In December last, the Shunglu Committee on the financial position of distribution utilities had also given various suggestions, including setting up of a special purpose vehicle, to absorb the losses of discoms.
Net loss
The net loss of 15 discoms, which account for over 90 per cent of the country's power consumption, after subsidies was Rs.27,000 crore for the year ended March 31, 2010. The poor health of discoms is mainly attributed to the low-tariff regime as well as high aggregate technical and commercial losses. Recently, the Appellate Tribunal of Electricity (ATE) asked the State regulators to ensure time and cost-reflective tariff determination.
Rating agency ICRA, based on a study of discoms functioning in 11 State, has pegged the losses of these utilities (before accounting for government subsidy) at Rs.80,000 crore for the current fiscal.
Meanwhile, a senior Power Ministry official said the Cabinet would soon be taking a decision on imposing 21 per cent duty on import of power equipment.
The Ministry, last month, floated a Cabinet note proposing 19 per cent import duty on power gear. However, the 2 per cent rise in the excise duty slab in the latest budget would now be incorporated in the note.
The note will also include 5 per cent basic customs duty, 10 per cent countervailing duty and 4 per cent special additional duty.
At present, equipment imported for projects of less than 1,000 MW capacity attract 5 per cent customs duty, while those above that enjoy exemption. The plan to impose higher duty on overseas power gear is aimed at providing a level-playing field for the domestic manufacturers such as BHEL and L&T, which are battling intense competition, mainly from China.
A committee headed by Planning Commission Member Arun Maira in its report had suggested imposition of 14 per cent levy — with a customs duty of 10 per cent. Private power producers are not in favour of such proposal. They have requested the Prime Minister's Office to intervene in the matter.
