List SEBs to end their financial woes: Chaudhuri

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As a long-term solution to the woes of the heavily-stressed power sector, which is likely to seek nearly Rs 70,000 crore debt restructuring this fiscal, SBI chairman Pratip Chaudhuri has called for listing of these highly-leveraged state-run utilities.

"My personal view is that all the discoms (distribution companies) and generating companies should try to get listed," Chaudhuri said here over the weekend.

Pointing out that 'stock market pressures' can help drive professionalism in such companies, he said, "listing will make them more viable and would make them adopt more enlightened and commercial policies."

Explaining the benefits of going public, he further said once listed these state-run utilities will have to abide by corporate governance, and that the pressure to manage 'investor perceptions' will also help in efficiency.

However, he added that State Bank of India (SBI) does not have any exposure to such assets which are under stress now.

"We don't have much exposure to the discoms. Our exposure to the power sector is confined to the top-end," he said.

Welcoming the recent 24 per cent hike in tariffs in Delhi, Chaudhuri said it will help the borrowers become more viable.

Recently, an IBA panel had called for mandatory annual tariff hikes by state-run utilities as a pre-condition for further lending to them.

Already over half-a-dozen discoms including Haryana, Tamil Nadu, Rajasthan and Punjab, among others, have gone for CDR worth Rs 30,000 crore last fiscal.

Meanwhile, the Reserve Bank has also warned against the asset quality of banks' exposure to the power sector.

Stating in its fifth Financial Stability Report released last Thursday that the power sector is under stress, the apex bank attributed the problems facing the sector to the rising losses and debt levels in state electricity boards (SEBs), coupled with the shortage of fuel supply for generation.

"Potential pressures on asset quality have intensified with restructuring in bank credit to the power sector registering a sharp increase, especially in the last quarter of FY12, even as impairments as a ratio of outstanding credit has moderated," the report noted.

On mounting losses of SEBs that are impacting the asset of banks, the RBI report said, "banks have an exposure of nearly Rs 5.5 trillion to the over-leveraged power sector, and nearly 12 per cent of this are already restructured as of March-end."

According to a recent Crisil report, out of Rs 2 trillion likely loan recast this fiscal, nearly 30 percent is expected from the power sector.

The Crisil report also said losses of state-run discoms rose 24 per cent to Rs 27,500 crore between 2006-07 and 2009-10, and warned that this may top Rs 35,000-40,000 crore in FY11.