Financial experts have advised the State Government to come to the rescue of State-run GRIDCO in view of its huge loan burden, for which it is coughing out Rs 700 crore as interest every year.

The advice was given at a pre-Budget discussion held by Finance Minister Niranjan Pujari on Monday.

Former Odisha Electricity Regulatory Commission Chairman UN Behera said the second round of reform in the electricity sector has been embarked upon in the State with 51% stake in all the four distribution companies having been transferred to a private sector entity through a competitive bidding process.

Contractual arrangement has been put in place for timely payment of electricity bills by the distribution companies to the GRIDCO. In fact, they have opened Letters of Credit for two months’ power bills in advance.

As a result, the GRIDCO would not have any cash flow problem for paying the power bills of the generating companies. This had been the major problem in the earlier regime.

Earlier, the DISCOMs were not able pay their dues to the GRIDCO and it could not collect their power bills in time. As a result, huge arrears built up turning to bad debt. The GRIDCO had to borrow huge amounts from commercial banks for meeting their payment obligations to generating companies.

The GRIDCO’s annual interest liability has gone up to Rs 700 crore. If this is recovered from the consumers, it would have an additional tariff liability of 35 paise per unit. In order to allow the GRIDCO to start with a clean slate, its bank borrowings need to be cleared, Behera advised.

In any case, the borrowings have been secured by Government guarantee. It may require five to seven years for clearing the borrowings. But a planned support may be provided so that the annual interest burden on account of legacy liabilities is wiped out, he advised.