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CCEA approves scheme for securitisation of SEB dues

The Cabinet Committee on Economic Affairs, or CCEA, today approved the scheme of securitisation of outstanding dues of public sector undertakings like NTPC, Coal India Limited on state electricity boards, or SEBs, by issuing bonds to the extent of around Rs 100 billion.

Announcing the securitisation scheme, after a CCEA meeting presided over by Prime Minister Atal Bihari Vajpayee, Parliamentary Affairs Minister Pramod Mahajan said that the details of the scheme will be prepared by the power and mines and minerals ministries.

The scheme cleared by the CCEA would help in unlocking the unpaid dues by the state electricity boards and the money available to the PSUs through the bonds could be utilised for new investments.

A coupon rate of around ten per cent is expected to fixed on the bonds, Mahajan said.

Mahajan said the bonds would be backed by the state government guarantee with specific allocations to be made by the state governments in their budgets for servicing the bonds if the SEBs are unable to do so.

He said further comfort would be provided to the bond holder by the central government, which would use the existing authorisation to deduct up to 15 per cent of central plan allocations for the state in case it is unable to meet the guarantee obligation for redemption of bonds.

The bonds would enjoy tax-free status, i.e. the interest income on the bond would attract no tax.

The minister explained that large number of SEBs are sick and they have to pay heavy amounts to the PSUs on account of purchases made by them in recent years.

Mahajan clarified that only the principal amount of the outstanding dues as on December 31, 1999 would be converted into the bonds. The interest and dues arising after that period continue to remain as outstanding dues.

The decision is expected to cause heavy financial burden on the state governments, who were facing serious financial crisis after the fifth pay commission. It may also result in increase in electricity rates.

Nod for AT&T's enhanced equity participation

The CCEA approved AT&T's equity participation of Rs 16.05 billion in Birla AT&T Communication's enhanced paid-up capital of Rs 32.75 billion.

The joint venture company provides cellular communication services in Maharashtra and Gujarat.

In 1995, the government approved AT&T's original equity participation of Rs 2.57 billion when the total paid-up capital was Rs 5.25 billion.

The cap on foreign capital in the telecom sector remains at 49 per cent.

UNI

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