PSPCL’s financial re-structuring an uphill task

NITIN JAIN

Chandigarh

The Punjab government has reiterated its demand for getting equal share and upfront payment from the Union government to allow financial re-structuring of the Punjab State Power Corporation Limited (PSPCL).

The Central government has recently announced a plan for financial re-structuring of state power distribution companies. Under this plan, 50 per cent of short term loans are proposed to be converted into long term by public sector banks. The state will be required to take remaining 50 per cent of short term loans for which it has been allowed to issue bonds. However, these bonds are to be issued within borrowing limit of the state. The Centre is offering reimbursement of 25 per cent of the state’s debt taken on this account.

Renewing the state’s demand during pre-Budget meeting with Union Finance Minister P Chidambaram in New Delhi recently, Punjab Finance Minister Parminder Singh Dhindsa said the state has little fiscal space within the borrowing limit to accommodate 50 per cent of the short term debt of power distribution companies, which works out to about Rs 5,000 crore. The annual liability on the state will be about Rs 1,000 crore. “It is under these circumstances that we had not agreed to the proposed package,” he reasoned. In December last, the Punjab government had out-rightly rejected the Centre’s financial restructuring scheme for power utility, terming it as an “attempt to bailout banks and not to help state-owned power utilitie,” as it is touted. Finding the scheme under the present framework as ‘rigid and non-viable,’ the state government has sought increase in the Centre’s grant and relaxation in the conditions for its implementation.

With expected revenue of Rs 19,000 crore in current fiscal, the PSPCL has projected revenue gap of Rs 8,984 crore for 2012-13. Haryana has already accepted the scheme with an aim to achieve turnaround of debt-ridden power utilities in next three years. The scheme, which requires the state power utility to achieve financial turnaround, was earlier open till December 31, 2012, but now the Union government has extended the last date of acceptance of this package to March 31.

“We are willing to reconsider the issue provided that the bonds for 50 per cent of short term loans should be kept outside the borrowing limit of the state or borrowing limit be increased from 3 per cent to 5 per cent to accommodate these bonds, the reimbursement by Centre 25 per cent of the debt taken out by the state government should be increased to at least 50 per cent and it

should be paid upfront rather than at the end of actual repayment by the state government,” Dhindsa told Chidambaram.