RBI working with government to revive distressed power utilities: Raghuram Rajan

Reserve Bank Governor Raghuram Rajan on Tuesday said the bank is working with the Centre and the state governments to revive distressed power distribution companies.

"The government is fully cognizant of the problem (relating to discoms), as are we. We don't intent to kick the can down the road as perhaps has been the unintended consequences of the past policies," Rajan said when asked about the ongoing crisis in the state discoms. He said there is a need to take a very careful decision to put the power distribution companies back on track with healthy capital structures and absorb the debt that has been created over time in the right place with the right sort of interest rates.

"That is the intent of what we are working on with the government and with the states. Hopefully, we will get a resolutions which will help the power distribution companies look ahead," Rajan said. He, however, said there will be a lot of contingencies in the final resolution that they will have to meet by the states, Centre as well as for the actions from the RBI.

Later, speaking to the analysts, Rajan said one aspect of the resolution of the issue of discoms will the power tariffs which will have to be moved to a point where the discoms become viable.

Finance Minister Arun Jaitley yesterday said although the country's distribution networks through the national grids have improved, the final access is by the state discoms where reforms have been carried out in very few states.

"There are four states that are in dire distress as far as their discoms are concerned and four others where the situation is reasonably challenging," he had said. He said the RBI has put those state governments on notice that if they do not charge adequately and make users pay for the power supplied, the banking system at its own peril cannot continue to support them.

The Power Ministry is in active discussions with those states and most of them have responded quite positively, he said.

"The Power Ministry is in the final stages of giving effect to the discussions it had with each of these states. "These states would have to enter into a discussion and probably an agreement with the Power Ministry and it is only that the kind of relief being worked out in relation to these states would be available to them," he added.

Jaitley had further said the states that "want to fall outside this reform process will then have to suffer at their own policy levels".

"It would be advisable to all of them to follow the suggestions which is now being given by the Power Ministry so that in the course of next one or two years the distress situation of those states can be resolved.

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