Default fears grow for state electricity boards

Mumbai: Bankers across the country are huddling in board rooms to discuss a problem they thought had been tackled years ago. But the financial rot in some state electricity boards (SEBs) has only worsened since banks restructured loans to these entities under the financial restructuring proposal (FRP) in September 2012.
Less than three years later, as the moratorium on principal repayments included in the restructuring packages, comes to an end, bankers are fearing defaults from at least some of these SEBs. Some states such as Rajasthan are already seeking fresh restructuring of more than Rs.50,000 crore in short-term liabilities.
What’s making bankers more restless this time around is the seemingly hands-off approach taken by the central government and the banking regulator so far. Both seem to be putting the onus on states to resolve the issue through a combination of tariff hikes and cutting down of transmission losses—neither of which will provide immediate respite to SEBs or their bankers.

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