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Govt clears Rs 2 lakh cr bailout for power sector

Sep 24, 2012 10:45 PM IST India India

New Delhi: In a slew of decisions taken by the government to push reforms, the Cabinet on Monday cleared a Rs 2 lakh crore package for the financially bleeding state electricity boards, a bonanza of One Rank One Pension for ex-servicemen and also hiked Dearness Allowance by 7 per cent for Central government employees.

In a move to turnaround the near-bankrupt power distribution companies, the Centre finally kickstarted the much needed power restructure on Monday.

Under the scheme approved by the Cabinet Committee on Economic Affairs, 50 per cent of the short-term outstanding liabilities would be taken over by state governments.

Balance 50 per cent loans would be restructured by providing moratorium on principle and best possible terms for repayments, an official statement said.

As part of mandatory condition, 50 per cent of the outstanding liabilities up to March 31, 2012 are to be taken over by the state governments. This shall be first converted into bonds to be issued by discoms to participating lenders, duly backed by the state government's guarantee.

The scheme is effective as soon as notified and will remain open up to December 31, 2012 unless extended by the government, the statement said.

The support under the scheme will be available for all participating state-owned discoms on fulfilling short-term mandatory conditions, it said.

The restructuring or reschedulement of loans is to be accompanied by concrete and measurable actions by discoms or states to improve the operational performance of the distribution utilities.

As per the statement, the takeover of liability by state governments from discoms in the next two-five years by way of special securities and repayment and interest payment to be done by state governments till the date of takeover.

The approved scheme is formulated based on report of expert group headed by BK Chaturvedi, Member (Energy) Planning Commission and deliberations in the PMO and Finance Ministry, it said.

For monitoring the progress of turnaround plan, two committees at state and central levels, respectively, are proposed to be formed, the statement said.

The Central government will provide incentive by way of grant equal to the value of the additional energy saved by way of accelerated AT&C loss and capital reimbursement support of 25 per cent of principal repayment by the state governments on the liability taken over by them under the scheme, it added.

The accumulated losses of the state power distribution companies (Discoms) are estimated to be about Rs 1.9 lakh crore as on 31st March, 2011.

"It is a step in the positive direction. The loss reduction and tariff increase plans would need to be monitored very strictly so that utilities are able to break even in next 3 to 4 years and in the interim they need to be provided adequate transition finance," Ashok Khurana Director General Association of Power Producers said.

In another important decision, services personnel who have retired before January 2006, will now be entitled to pension almost equal to their counterparts who superannuated after this date, the Government decided on Monday fulfilling a long-pending demand of ex-servicemen.

A proposal, which will entail a cost of Rs 2,300 crore per annum, was cleared by the Cabinet in its meeting on Monday.

The slew of measures taken by the Government to increase pension and pay of the armed forces included enhancement of family pension, granting of dual family pension and family pension to mentally and physically challenged wards of defence personnel even after their marriage, officials said here.

An official release said steps taken by the Government are expected to largely "meet the demands of the defence pensioners for one rank one pension (OROP)."

The recommendations were made by the Committee of Secretaries headed by the Cabinet Secretary and including the Secretaries of Defence, Expenditure and Ex-servicemen Welfare.

"The gap in pension of pre- and post-January 2006 retiree jawans will be bridged by determining the pension of pre-January 2006 pensioners on the basis of notional maximum for the ranks and groups across the three Services as in case of post-January 2006 retirees," the release said.

The decision would be implemented from a prospective date, Defence Ministry officials said.

As per the present system, personnel retiring under the 6th pay commission get more pension than their counterparts who have retired under previous pay commissions.

The Cabinet also accepted the enhancement of family pension for the families of serving and retired defence personnel who have lost their lives.

The government also allowed the Dual Family Pension which means that the pensioner would be allowed to draw both military and civil employment pensions.

It also agreed to the demand of granting family pension to mentally and physically challenged children of defence forces personnel even after their marriage.

This pension was so far granted to them only till their marriage.

The Union Government on Monday also hiked Dearness Allowance (DA) by 7 per cent, benefiting its 80 lakh employees and pensioners and costing the exchequer an additional Rs 7,408 crore annually.

The hike will be effective from July 1, 2012, and the employees would be entitled for arrears from this date.

The hike in the DA from 65 per cent to 72 per cent will cost the exchequer Rs 4,939 crore for the remaining part of the current financial year. The annual burden on account of the DA increase has been estimated at Rs 7,408 crore, says an official release.

The decision, which was approved by the Union Cabinet, will benefit about 50 lakh employees and 30 lakh pensioners of the central government.

The increase in DA is in accordance with the accepted formula which is based on the recommendations of the 6th Central Pay Commission, the release added.

(With additional inputs from PTI)