Discoms enjoy much bigger bailouts than farm loan waiver
The Rs 36,000-crore farm loan the UP government is planning to waive amidst much caution by financial experts is less than the money it provided to banks two years ago to write off debts of its nonperforming power distribution companies.
And this was not a one-time affair. The state government has written off discoms’ debts at least on four occasions since their inception 15 years ago.
Between 2012 and 2015, the state had taken over discoms debts to the tune of a whopping Rs 72,000 crore, an amount that is double the money that the Yogi government will be providing to banks to waive farmers’ loan with many a rider.
Unlike in farmers loan waiver case that has caused so much hue and cry all over with banks and many experts terming it (loan waiver) as a ‘bad practice’, the discoms’ debt waiver went unnoticed on all the occasions. Interestingly, the dicoms’ efficiency only took a hit after each waiver.
UP was the first state to grab the Ujjwala Discoms Assurance Yojana (UDAY), a centre’s scheme aimed at bringing financial turnaround of debt-ridden discoms, in 2015.
As a part of agreement, the then Akhilesh government took over 75% of the discoms’ debts, that is Rs 39,000 crore out of the total Rs 53,211 crore debt pending at that time, besides restructuring Rs 10,700 crore loan.
But as the Rural Electrification Corporation (REC) pointed out to the UP Power Corporation Ltd (UPPCL) in a recent report, the overall net loss of the discoms in UP increaded to Rs 7932 crore during 2017 from Rs 7,791 crore in 2016.
Prior to this, the UPA government had come up with a similar scheme for the discoms in October 2012. The state government agreed to take over 50%, that is Rs 33,000 crore, short-term outstanding loan liabilities of discoms while giving its nod to furnish guarantee to banks for restructuring of the remaining debt amount. The Centre too provided additional financial support to discoms in the form of interest subsidy etc.
Earlier also, the state government gave bailout packages to the power sector in 2000 and 2002.
“The state government has taken over the ailing power sector’s debt liabilities on four occasions since its unbundling in 2000,” a senior official in the finance department said adding, “Writing off discoms’ debts again and again is even a worse practice than waiving farmers’ loan once in a while.”
According to AK Singh, ex-director, Giri Institute of Development Studies, governments write off huge debts of big corporations and private companies at one stroke while they exercise extreme caution when it comes to farmers. “This is largely because farmers as a community are not organized,” he said.
It is interesting that while farmers are forced to sell their hard-earned crops even below the minimum support price (MSP) in the state due to various factors, the same discoms that have become even more inefficient. Despite all the government assistance and 50% increase in electricity tariff in just two-three years, they have now demanded as much as 16% return of equity or an assured profit from consumers.
“This is shocking that corruption and inefficiency-ridden discoms that have received 3-4 heavy financial bailout packages during last 15 years and also enjoy the government’s regular budgetary supports have in their recent annual revenue requirement proposal to the regulator demanded 16 % profit on their investment,” UP Rajya Vidyut Upbhokta Parishad president Avadhesh Kumar Verma said.