Punjab's Electricity Board near collapse due to massive debt
PUNJAB STATE Power Supply Company (PSPCL) is taking loans every year to repay interest and earlier loans. As a result, there is grave danger of the company exhausting its borrowing limit, which may result in non-payment of bills.
PUNJAB STATE Power Supply Company (PSPCL) is moving into a serious debt trap as more and more loans are needed to repay the principal and interest on previous loans. During the current financial year, PSPCL has taken loan of Rs. 3285 crore and the interest paid during the year on previous loans is 1678 crore. Padamjit Singh, patron, PSEB Engineers Association said that the loading of previous outstanding loans on the new utilities after restructuring by state government has negated the prime objective of restructuring, which was to give a clean balance sheet so as to ensure the viability of the new companies. The ARR filing shows the gap to be increasing from Rs 1978 croe (2009-10) to Rs 3446 crore (2010-11) to Rs 4233 crore (2011-12).
PSEB Engineers Association has brought to the notice of Regulatory commission that the previous year’s practice of taking working capital loans so as to bridge the operational gap between expenses and income would make the debt trap progressively more vicious and unmanageable. The interest on loan component is the danger signal that requires the urgent attention of the Commission, as well as state government. The finance department of PSPCL in an in-house presentation mentioned that the company cannot survive financially by keeping on borrowing loans for meeting its revenue expenditure month after month as it is against the basic principle of sound financial prudence. Further, the company may not be able to raise further loans for its working capital requirement as most of the banks have already reached their exposure limits, and they may not come forward for additional lending.
The finance wing of PSPCL in a recent presentation has stressed that the borrowing limit of the company is almost exhausted and is required to be immediately enhanced to Rs 20,000 Crore. Otherwise, the fear is that the company may default on its committed payments in near future as it will not be able to raise additional loans beyond Rs.18000 crore. The presentation has suggested that there is a immediate need to provide additional equity of Rs 2000 crore to save the company from collapse.
PSEB Engineers Association has brought to the notice of Regulatory commission that the previous year’s practice of taking working capital loans so as to bridge the operational gap between expenses and income would make the debt trap progressively more vicious and unmanageable. The interest on loan component is the danger signal that requires the urgent attention of the Commission, as well as state government. The finance department of PSPCL in an in-house presentation mentioned that the company cannot survive financially by keeping on borrowing loans for meeting its revenue expenditure month after month as it is against the basic principle of sound financial prudence. Further, the company may not be able to raise further loans for its working capital requirement as most of the banks have already reached their exposure limits, and they may not come forward for additional lending.
The finance wing of PSPCL in a recent presentation has stressed that the borrowing limit of the company is almost exhausted and is required to be immediately enhanced to Rs 20,000 Crore. Otherwise, the fear is that the company may default on its committed payments in near future as it will not be able to raise additional loans beyond Rs.18000 crore. The presentation has suggested that there is a immediate need to provide additional equity of Rs 2000 crore to save the company from collapse.
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