NEW DELHI: The government is working on debt recast of state power distribution companies to improve the deteriorating financial health of the discoms that are also responsible for rising bad loans of public sector banks.

"We are working very closely with the Power Ministry and also the affected 8 stressed states," Finance Secretary Ratan P Watal told reporters here.
A lot of progress has been made in the power sector over the last one-and-a-half years and mainly the financial health of discoms has received the highest attention of the government, he said.
"We are working with the Power Ministry and the States to find a lasting solution to this problem in a manner that ensures the gains of fiscal consolidation made over the 12th and 13th Finance Commission periods...while preparing a financial restructuring plan that incentivizes discoms to generate more revenues," he said.
Emphasising that there are 3-4 states badly affected, he said: "Now we are working on some measures how to get around this problem by also putting certain conditionalities on these states that they have to do some drastic reforms because very simply if you don't pay for power, things don't work. It clogs up whole thing down the line." According to sources, the Union Cabinet is likely to consider this week a proposal to recast Rs 4.3 lakh crore loans of nine state power distribution companies with a view to bring down their liabilities.
The total loans to the discoms in the nine states -- Uttar Pradesh, Tamil Nadu, Telangana, Rajasthan, Madhya Pradesh and Jharkhand -- add up to Rs.4.3 lakh crore, sources said.
On account of subsidised tariffs, the state electricity discoms are facing cash crunch and are incurring annual losses of about Rs 60,000 crore
Finance Minister Arun Jaitley had also recently expressed his concern over the financial health of some state-owned discoms and said that some states were not levying adequate electricity tariff.
"... Some states were not charging adequate money for power, which was affecting the discoms, and these states cannot expect the PSU banks to fund the deficit of discoms," Jaitley had said. On bankruptcy code, Economic Affairs Secretary Shaktikanta Das said, the committee has made its presentation before the Finance Minister.
"We have been interacting. Before end of October, we expect them to submit report to the government. After that government will examine the report and will take action on that," Das said.