NEW DELHI: Flagging the heavy debt burden of Discoms, a Group of Ministers (GoM) has suggested restructuring the outstanding debt, with States absorbing the unsustainable debt, while the management control of the utility will be taken over by a strategic partner.
The GoM on the viability of Discoms, which was formed in January 2025, pointed out that despite several debt restructuring programmes since 2003, these entities remain saddled with unsustainable debt. The total accumulated losses of Discoms stood at around ₹6.5 lakh crore in FY23, rising further to over ₹7.5 lakh crore by FY24.
Sources said that the GoM has suggested a slew of measures, including the timely implementation of tariffs, professional management of Discoms, listing of utilities and reducing cross-subsidy, among others.
The high-level panel proposed divesting equity in at least 20 per cent of the total consumption of a Discom at the State-level, which may include participation by a strategic partner.
While the debt should be taken over by the State, the management control of the distribution utility will pass over to the strategic partner, it suggested.
The GoM has suggested two options. Under the first, the proposal is to create a separate entity with private sector participation.
Under this, the States will divest a minimum equity of 51 per cent, which will be determined by the State. The unsustainable debt will be taken over by the State government, for which it will get an exemption under the Fiscal Responsibility and Budget Management (FRBM) Act.
To cover the debt with the new entity, the Centre will provide a loan for 50 years with no interest, similar to the Special Assistance to States for Capital Investment (SASCI) Scheme.
Under the second option, States can offload a minimum of 26 per cent of their stake in the Discom. The management rights will be transferred and the unsustainable debt will be taken over by the State government, for which it will get FRBM exemption. The dividends from the divested portion will be utilised to service interest obligations.
The GoM has also proposed steps for States that do not want to give up the management control, but want capex support from the Centre. Such Discoms must be listed on a recognised stock exchange. The entity should be listed on the stock exchange within 3 years from the notification of this scheme.
The Discoms that want to float an IPO should have a positive profit after tax (PAT) for 5 years from the notification of this scheme. They should attain and maintain a rating of A or above.
The Centre will provide capex support for infrastructure in the listed entity with an equity grant (ex-tariff) for 5 years. If these conditions are not met, the Discom will not get capex support from the Centre.
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