AIPEF welcomes bailout package for Discoms | PSEB Engineers Association

AIPEF welcomes bailout package for Discoms, opposes franchisee

V K Gupta

06 October, 2012

The All India Power Engineers Federation (AIPEF) has welcomed the move to bail out the power distribution companies and oppose the introduction of franchisee system as a pre-condition. 1 1 0 New 00.0/512345
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SHALIENDER DUBEY Secretary General AIPEF said that nothing has been spelt out to improve the conditions of loss-making DISCOMS. In the name of bailout package move to privatise, creamy profit earning urban areas, through urban distribution franchisee, the move has been accelerated. The whole exercise seems to be pro-privatization, which ultimately will lead to further deterioration of financial health of Discoms in the state sector.

Share Dubey further said that Rs. 1.9 lakh crore bailout package declared by government is, in real sense, to bail out banks and other financial institutions rather than Power Discoms.

Due to wrong policies of successive Governments, the gap of average cost of supply and average tariff has gone up from 50 paise to 145 paise per unit in less than a decade. In some states this gap has gone up to 200 paise per unit.

The overall book losses of the Discoms till March 31, 2012 was estimated at Rs. 1.90 trillion, of which 70% of the losses were estimated to be contributed by the discoms of Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh. UP has liabilities of Rs. 25934 crore, Punjab Rs. 11646 crore, Haryana Rs. 14088 crore and Rajasthan Rs. 39710 crore, and are said to be the main beneficiary states.

The whole purpose of this exercise seems to be two-fold. The first is to meet the Discoms’ immediate liquidity requirements, which will also enable lenders to avoid the prospect of their loans turning into non-performing assets. Secondly, since the loan restructuring is subject to the Discoms/State Governments undertaking “concrete and measurable” actions to improve the operational performance of the utilities, it would eventually restore the viability of the weakest link in the power sector value chain.

The tragedy of the power sector in various states including UP, Punjab, Haryana is that the state is depending heavily on power purchase to tide over the power crisis year after year, and are not concentrating on adding generation capacity in the state sector.