Post date: Sep 25, 2012 2:57:27 PM
Moily was speaking a day after the government approved a bailout package for the distributors, driven into debt by years of populist policies, corruption and mismanagement.
"(The losses are) because of the non-revision of tariff, non-payment of subsidies, high cost of power purchase, high distributional losses. Particularly, the difference between cost of supply leverage tariff increased from 76 paise per kilowatt-hour in 1998-99 to 145 paise per kilowatt-hour in 2009-10, resulting into discoms (distribution companies) falling into a virtual debt trap," he said.
India's power distributors accumulated losses of 2.46 trillion rupees ($ 46.4 billion) up to the end of the fiscal year ending March 2012, says Power Minister Veerappa Moily.
NEW DELHI, INDIA (SEPTEMBER 25, 2012) (ANI) - India's power distributors had accumulated losses of 2.46 trillion rupees ($ 46.4 billion) up to the end of the fiscal year ending March 2012, Power Minister Veerappa Moily said on Tuesday (September 25).
The cabinet approved a plan on Monday (September 24) to bail out cash-strapped power distributors saddled with more than $35 billion in debt, but which analysts said offered little to reform a sector whose dysfunction has exacerbated a growth-sapping energy crisis.
The country's mostly state-owned distribution utilities are drowning in losses and were blamed for triggering one of the worst blackouts in history in July, when power was cut for two consecutive days in an area with 670 million people.
Moily said that the bailout came at a vital time, since it would push power companies into a position to do business again.
"Majority of the discoms are not in a position to do business today. They cannot borrow, they cannot purchase power, they cannot sell power. This (bailout) is an economic activity. Now they can borrow, then they can purchase power, they can sell power, the transactions will continue. Then, there will be internal generation of their own resources," he said.
Under the rescue plan, state governments will take on half of power distributors' resulting short-term debt over the next two to five years and convert it into long-term bonds, a government statement said after the cabinet approved the bailout.
Ramping up power generation and speeding up infrastructure projects are central to Prime Minister Singh's push to revive economic growth, which has slowed to 5.5 percent-far below India's ambitions of a double-digit clip.
Though rich in coal reserves, India has struggled to increase power generation as projects have been mired in land acquisition battles and bureaucratic hassles. Scandals over sweetheart deals for coalfields have made a bad situation worse.
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