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Terms for securitisation of SEB dues imposed

Our Bureau

BANGALORE, July 10

THE Centre has imposed a precondition for securitisation of outstanding of State electricity boards (SEBs) as part of process of reforming the power sector.

The precondition includes making budgetary provisions in the respective State budgets for servicing liabilities arising out of the securitisation of the outstandings. This is necessary, since any securitisation mechanism would have to assure an underlyin g cash flow for the bond-holder.

Speaking at a meeting of Power Ministers of the Southern States, the Union Minister of Power, Mr. Rangarajan Kumaramangalam, said here, that the respective State governments would have to decide the quantum of securitisation.

The Union Cabinet had recently cleared the decision of securitisation of SEB dues to the tune of Rs. 10,000 crores to the Central power sector undertakings. Issue of this securitised paper is to be sovereign-guaranteed so as to keep the discounting rate s close to the sovereign borrowing rates.

This would also allow for a charge on the Plan allocations to the State to be used as an additional tier of security to the subscribers of the securitised instruments. As on May this year, outstandings from the Southern States alone was about Rs. 1,162 c rores, with Andhra Pradesh topping the list at Rs. 355.62 crores.

Among the options now being considered by the Ministry of Power include asking the public sector undertaking, Power Finance Corporation to undertake the entire securitisation exercise.

The Minister also asked the southern region electricity boards and the PowerGrid Corporation to hasten implementation of transmission projects to meet the capacity that is likely to be made available from Simhadri project of the National Thermal Power Co rporation.

The first stage of this 1500 MW project is expected to go on stream sometime next year. However, transmission lines for evacuation of this power is expected to come in only later.

In addition to PGCIL's own capacity, other States are also creating transmission capacity, including 400 kv lines and high-tension direct current lines for evacuation of power from some of the new projects.

Unless these transmission projects are also completed on time, ``a lot of power could go waste,'' as was already happening in the eastern region.

Responding to States' demand for linking naphtha price to export parity instead of the current pricing of import parity, Mr. Kumaramangalam said this issue had been referred to the Petroleum Ministry. Officials of the Ministries of Power and Petroleum we re due to meet on this issue.

A sub-committee for concessions for rural electrification projects would submit its report to the Group of Ministers (GoM) set up for the purpose. Based on the GoM's recommendations the matter would be taken up to the Cabinet for working a fresh package of incentives, he added.