Standard Post with Image

Conversion of Loans to Bonds: Will it Help DISCOMs to Ease off their Financial Burden?

News

Bankers may be asked to convert 75% of their outstanding loans to power distribution companies (discoms) into state government bonds, while reducing the lending rate on the remaining loans, according to a proposal discussed between the power ministry and bankers on Friday.

Source:- live mint

SNP Insight

The proposed restructuring plan by the government is another attempt to reduce the debt piled up for discoms. Along with conversion to state government bonds there will be a cap on future borrowings of these discoms, with fresh working capital loans limited to only 33% of a dicom’s annual revenue. However the underlying aim to push these companies to raise tariffs and cut losses may again go in vain.

Source:- SNP Infra Research