In a major financial maneuver, Maharashtra's state-owned power distribution company, Mahavitaran, has cleared a colossal loan of Rs 12,800 crore in one go. This unprecedented step comes shortly after Chief Minister Devendra Fadnavis reaffirmed his government's commitment to reducing electricity bills for consumers annually.
CAG Report Highlights Fiscal Pressure
The move gains significance against the recent observations of the Comptroller and Auditor General (CAG). In a report tabled last Sunday, the national auditor flagged concerns over Maharashtra's rising debt and fiscal stress. The CAG pointed out that nearly 61% of the state's fresh borrowings were being used just to repay old debt, a practice raising alarms about intergenerational equity.
Furthermore, the report underlined that various populist schemes, with an estimated cost of around Rs 96,000 crore, were squeezing the state's fiscal space and could potentially impact long-term economic stability.
A Strategic Financial Repayment
Acting on directives from the Chief Minister to bolster its financial health, the Maharashtra State Electricity Distribution Company Ltd (Mahavitaran) announced the prepayment of the Rs 12,800 crore loan it had taken from the State Bank of India (SBI). The company's Chairman and Managing Director, Lokesh Chandra, detailed the strategy.
Rs 7,100 crore of the total amount was refinanced through another financial institution at a lower interest rate of 8.25%, while the remaining Rs 5,634 crore was repaid using the company's internal resources. The original SBI loans carried interest rates between 8.65% and 9.25%.
This strategic repayment is expected to lead to substantial interest savings for the utility, which is the largest power distributor in the country.
Implications for Future and Consumers
The repayment has unlocked significant collateral. Initially, revenues from ten high-performing circles, generating about Rs 30,000 crore annually, were pledged against the SBI loan. With the loan cleared, this revenue stream is now free.
Officials stated that this strengthened financial position means Mahavitaran can now potentially raise up to Rs 50,000 crore in future borrowings at more moderate interest rates. The move is also seen as a major boost to the company's credit profile, enhancing investor confidence for any future bond issuances or even a potential stock market listing.
For the common consumer, the government connects these financial steps to CM Fadnavis's assembly assurance. He promised a reduction of Rs 2 per unit in power tariffs every year, a plan he said would be achieved through large-scale renewable energy projects like solar and pumped storage hydropower, along with the rollout of smart meters to curb losses and save energy.
The government hopes that a stronger Mahavitaran, with lower debt servicing costs and a cleaner energy mix, will eventually translate into cheaper and more reliable electricity for households across Maharashtra.
