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Debt Recast of Distribution Utilities:Is it the Ultimate Solution to Shed off Financial Burden from DISCOMs ?

News

The Union cabinet is likely to consider this week a proposal to recast Rs.4.3 trillion loans of nine state power distribution companies with a view to bring down their liabilities. People familiar with the matter said the debt restructuring proposal once approved would help the distribution companies in these states to access cheaper loans at an interest rate of around 9%, compared to around 14% that they are presently paying.

Source: live mint

SNP Insight

The debt recast programme of Distribution Utilities will help them to ease off their debt burden, by making them able to access cheaper loans, further it will also allow them to sign fresh PPAs with the generating utilities, which will help to supply reliable power to the consumers. Although this arrangement is considered as a temporary measure and since the state govt is responsible for the restructuring, it might happen that in coming years either DISCOMs or state govt is again financially pressed.

Source: SNP Infra Research