Loss-making discoms a drag on states' finances: RBI

New Delhi: The RBI on Friday said loss-making power distribution companies continue to impact financials of states and cautioned against their restructured debt liabilities turning into non-performing assets for the state governments.

Pitching for periodic tariff revisions, the central bank said losses of discoms have also raised "serious concerns" for banks and financial institutions. Faced with mounting debts of state-owned discoms (power distribution firms), whose overall losses stood at Rs 1.9 lakh crore till March 2011, the Union Power Ministry has come up with a debt rejig scheme, where one of the conditions is that 50% of short term liabilities are taken over by respective state governments.

"Strict enforceability of conditions associated with the restructuring package has to be ensured so that ... Financial stability in the economy is not threatened by the restructured loans turning into non-performing assets," RBI said.

In its annual report 'State Finances: A Study of Budgets of 2012-13' released today, RBI said financial losses of state power discoms continue to act as a "drag on finances of states". RBI said non-revision of tariffs, subsidy arrears, high cost of buying short-term power and high distribution losses are among key reasons for financial ill health of discoms.