The readiness of Financial Restructuring Plans (FRP) in some states is heralding good times ahead for present cash-strapped distribution companies.
Distribution companies of Rajasthan, Uttar Pradesh and Tamil Nadu have proactively finalized the process and have already issued bond to lenders, while Haryana is in the process of issuing such bonds. According to data provided in an article of Business Standard, these four states (out of 7) constitute major chunk of debt (1.9 lakh crore INR).
As per a senior PFC official – UP will overcome its short-term liabilities by 2014 and TN by 2017. This is expected to bring liquidity in the market and strengthen a timely financial settlement mechanism for power generators.
To encourage reduction of AT&C losses, a transitional financial mechanism has been put in place. The mechanism provides liquidity support equal to the value of additional energy saved through loss reduction. Going forward the emphasis needs to be on increasing tariffs for subsidized consumers rather than subsidizing consumers.