Money starts flowing in for UP power board revamp

Deepa Jainani Posted online: Thursday, Jul 25, 2013

Lucknow : UP State Electricity Board's revamp is finally getting a head start. As many as 8 banks of the 20-member consortium that had approved the power board's financial restructuring plan (FRP) for R31,680 crore of short-term liabilities, with a loan component of R15,840 crore, have started sanctioning the money. Out of these 8, two banks have already disbursed the loan amount.

Lead banker, Punjab National Bank (PNB), has disbursed R1,000 crore and Oriental Bank of Commerce (OBC) has disbursed R 391 crore. Speaking to FE, a senior official of the state government said Rs 1,391 crore received so far from the banks have been used to settle outstanding dues against the electricity purchased.

"While R1,100 crore has been paid as dues of the Central sector, R200 crore has been used to make regular payments to private power generators, including Reliance Power and Lanco Infratech," he said.

In fact, non-payment of dues became a major reason of discontent among private power generators early this year, forcing them to either suspend or cut down generation for some time.

"The remaining banks, too, will start disbursements soon. The second tranche of money will be used to pay off debts of sugar mills and the remaining dues of the Central sector. While co-generation dues amount to almost R1,200 crore, the Central sector dues are to the tune of R1,500 crore," the official said, adding that the only bank having some problems in sanctioning the loan amount is Allahabad Bank.

"Allahabad Bank's loan of R2,000 crore is the only one in question as of now due to it crossing the exposure limit," he said. Allahabad Bank's exposure is pegged at R9,000 crore.

In order to improve its financials, UP has submitted a tariff hike plan for the next eight years, which has already been ratified by the consortium of banks.

As part of this, tariff hikes are being evenly spread out over the years, starting with a 9% hike in 2014, a 10.38% hike in 2015 and another 8.36% hike in 2016. In fact, UP has already raised power tariffs by over 30% from last month for the first time in four years. It may be mentioned that the SEB restructuring package of R1.9 lakh crore has already been approved by the Central government. Around 70% of these losses are estimated to have been contributed by SEBs in six states — Rajasthan, Tamil Nadu, Uttar Pradesh, Haryana, Punjab and Madhya Pradesh.