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CCEA clears proposal for securitisation of SEB dues

Our Bureau

NEW DELHI, June 20

THE Cabinet Committee on Economic Affairs (CCEA) today cleared a proposal to securitise the principal amount of around Rs. 10,000 crores owed by the State electricity boards (SEBs) to the Central power and coal sector undertakings.

The proposal enables an upfront release of the SEB's dues to the coal and power companies up to December 31, 1999 in order to improve the latter's financial position.

According to the proposal, the SEBs concerned will issue tax-free bonds to public sector undertakings. The bonds will be backed with State guarantees with specific allocations to be made by the State Governments in their Budgets for servicing the bonds i n the event the SEBs are unable to service the bonds.

A second tier of security to the bond holder is the Centre's existing access up to 15 per cent of the Central Plan Assistance (CPA) to the States.

The SEBs would stand to gain from the lower interest rate that it would be attracting since it would be servicing tax-free bonds (at around 10 per cent interest rate) in contrast to the 18 per cent surcharge it would attract for non-payment of dues.

Fifteen per cent of the present CPA translates to around Rs. 900 crores per annum. The Centre will now decide on the precise securitisation amount depending on the quantum of devolutions to be kept apart for servicing the bonds.

The CCEA also approved a 400-KV DC Kolhapur-Mapusa transmission system at a cost of Rs. 181.91 crores (based on fourth quarter of 1999 price line).

The project is aimed at removing the transmission bottleneck faced by Goa which is able to draw only 200 MW from the grid from its share of 395 MW in the Central Generating System. The constraint is on account of the limited capacity in the 220KV line of the Maharashtra State Electricity Board which is used by Goa to draw its share in the CGS.