MDA Govt agrees to extend full budgetary support to MeECL for repayment of Rs 1,345 Cr loan

Syllad | The Rising MeghalayaJune 9, 2021

Under pressure, the MDA government on Wednesday agreed to extend full budgetary support to the Meghalaya Energy Corporation Limited (MeECL) for repaying the Rs 1,345 crore atma-nirbhar loan with a rider that certain targets have to be achieved in a time-bound manner.

The decision was taken by the state Cabinet based on the request and assurance given by the power department and MeECL management to bring necessary reforms in the corporation.

This also came following stiff opposition from several quarters including cabinet ministers against the move to lease out the distribution circles of the MeECL to the Rural Electrification Corporation Power Distribution Company (REC PDCL) for a period of 25 years. 

“(We) decided that we will be give a chance to the MeECL and to the power department with 100 percent budgetary support for the atma-nirbhar loan but this support of 100 percent will come along with certain targets that need to be met in a time-bound manner,” Chief Minister Conrad K Sangma told reporters after the meeting. 

“(The other condition being put in was that) there has to be somekind of a security in terms of mortgage of MeECL assets to the government of Meghalaya to ensure that there is some of kind of safety and security for the state government also,” he added. 

Sangma said the finance and power departments have been asked to workout details of the different targets which the MeECL has to achieve. 

“We will inform the REC and the Power Finance Corporation Ltd (PFC) that 100 percent budgetary support will be given by the state government,” he said.

Sangma informed that a meeting was held with the power department led by the power minister himself and the chiarman of MeECL where they have shown different aspects of power and also different steps that they will take to ensure that the reforms take place to achieve the overall revenue that is expected and also to reduce the aggregate technical & commercial (AT&C) losses if given a chance and stressed that the DFs option should not be taken. 

“Similarly, I had a meeting with the MeECL employees and they have also expressed similar concerns in line with the power minister had said that the DF option may not be taken and state government may give full budgetary provision and the MeECL and its staff and engineers will work together to ensure that the different targets in case are put in will also be achieved,” he said. 

Stating all these aspects were discussed in the cabinet meeting, the chief minister said that it was also clarified to the cabinet that these funds are going to come out from the same pool of resources that the state government has. 

“Therefore any payment or any support that will be given which will be a budgetary provision will come out, in case we have to pay, from the overall development budget of the state, therefore impacting the overall development aspect also,” he stated.

The atma-nirbhar loan has been taken by the MeECL in order to pay the outsanding dues amounting to Rs 1,345 crore to all the power generation companies  which has been pending for the past 10 years.

The REC and PFC have put conditions on the government of Meghalaya and MeECL while disbursing the loan.

“We have received the first tranche of the loan and before releasing the second tranche which again is Rs 600 crore plus, the REC and PFC have stressed on two options. The first option is that government of Meghalaya give full budgetary support for the repayment of this loan along with interest which will amount to close to Rs 2,000 crore in the next 10 years or give a partial budgetary support along with certain restructuring within the MeECL which would be in the form of giving Distribution Franchisees (DFs) to REC and PFC,” the chief minister said. 

He said these matters have been discussed in detail with the power minister, power department and MeECL management.

From day one, the MeECL, power department and power minister himself have stressed that state government should give full 100 percent budgetary support without going for DFs. 

“On the other hand, the finance department felt that since the amount is huge and in order to reduce the budgetary provisions and obligations on the finance and on the state government as a whole, certain amount should be given as budgetary provision and some for certain restructuring in terms of DFs may be done in the interest of finance,” he said.

Stating that DFs are not new in Meghalaya, the chief minister said DFs have been there for a long time and there are many DFs that are there working.

“A large number of them are there in Garo Hills, some are there in Khasi Hills and some are there in Jaintia Hills also, so  across the state, the DFs have been there for quite sometime, it is not a new concept,” he said

Asked, Sangma said the government will give the backing in term of the budgetary provision but at least some kind of safety for the government is also required so that MeECL is not totally free.

“So those terms and conditions will be worked out on how we move forward but the cabinet has decided that there has to be some kind of safety and security for the state government, there has to be some kind of time bound reforms that need to be put in place,” he added. 

Responding to another query, the chief minister said there is no risk for the state government in giving full budgetary support to MeECL.

“As I said government has anyway decided to give budgetary provision of 75 percent which comes to around 1,600 crore in the next 10 years, 25 percent would mean another 560 crore – now, the important thing to note is if MeECL pays, then it does not comes on the state government but if MeECL is not able to pay then the state government will have to pay – so that is really what the issue is here.The other side of the story is that we specially the finance department felt some kind of bringing in and infusing a competition into the system would push all the different stakeholders to start working and performing better.”

Sangma further informed that roughly the annual amount which has to be kept by the state government may come up to Rs 150 – Rs 200 crore as budgetary provision for repayment of the loan.