Commercial banks have laid tough conditions, such as regular review of power tariffs and a repayment guarantee from states, before they agree to restructure the mounting debt of state electricity boards (SEBs).
Distribution utilities in Rajasthan and Tamil Nadu have sought restructuring of loans but banks have made it clear that they would roll over the debt only if the state electricity boards abide by the prescribed fiscal discipline.
Lenders are reluctant to sanction new loans or roll over existing debt of SEBs because of huge losses reported by these utilities. Between 2006-07 and 2009-10, losses of power distribution companies rose 24% to 27,500 crore. Rating agency Crisil estimates losses could rise to 35,000-40,000 crore in 2010-11, mainly because of problems in utilities in Tamil Nadu, Rajasthan, Punjab, Haryana, Bihar, UP, MP, Jharkhand and Andhra Pradesh. A senior banker, who spoke on condition of anonymity, said at a recent meeting, lenders told the utilities the state governments, being the owners of SEBs, would have to bring in additional equity to support the loss-making operations of power distribution.
So far, only Punjab National Bank has restructured loans of Tamil Nadu Electricity Board. Among other lenders, Dena Bank, Bank of India and Indian Overseas Bank are in talks with SEBs to rejig loans.
Banks have also said SEBs will have to seek a tariff review every year.
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