Explained: Why Jharkhand has exited an agreement with Centre, RBI on power dues

After the deductions of more than Rs 1,400 crore, the Jharkhand government decided that the auto-deduction from the consolidated fund is not in favour of “Jharkhand’s health” and thus exited TPA.

Jharkhand exited from a Tripartite Agreement (TPA) between the state, Government of India (GOI) and the Reserve Bank of India (RBI) after an approval for the same by the Cabinet Wednesday. The TPA was invoked after the state government failed to clear its outstanding power supply dues to Damodar Valley Corporation. After the deductions of more than Rs 1,400 crore, the Jharkhand government decided that the auto-deduction from the consolidated fund is not in favour of “Jharkhand’s health” and thus exited TPA.

What is the Tripartite Agreement?

An agreement was signed between GOI, Jharkhand state and RBI in 2017 stating that the state government shall ensure that the state power utilities — in this case, Jharkhand Urja Vitaran Nigam Limited (JBVNL) — make the supply payment due to the Central Public Sector Units — in this case, Damodar Valley Corporation (DVC)—within the period specified in the supply agreement. In the event of State Power Utilities committing a breach in the terms, the state government shall independently and as a principal debtor become liable for the payment. As per the TPA, it authorises the GOI to instruct RBI to act promptly on its instructions i.e. to debit the amount.

What were the instructions of GOI that created a controversy in the state?

On September 11, a notice was served by the Power Ministry to the Jharkhand government to ensure payment of outstanding dues of Rs 5,608.32 crore—as was informed by the DVC—payable by the JBVNL to DVC within 15 days from the date of issue on this notice. In case the JBVNL fails to make payment within the timeline, the central government will invoke the provisions of TPA and recover the outstanding amount in four installments of Rs 1,417.50 crore each quarterly from the state government’s account. Accordingly, the RBI will be requested to debit Rs 1,417.50 crore in the months of October 2020, January, April, July 2021 from the account of the state government being maintained by the RBI and credit it into the account of GOI.

What did the GOI additionally say to the state?

The letter also drew attention towards schemes under Atmanirbhar Bharat Package announced by the GOI stating that it has announced liquidity infusion of Rs 90,000 crore for the power sector. As per this package, DISCOMS (distribution companies) can avail loan through REC/PFC (CPSEs of Ministry of Power, GOI) to discharge their liability to the CPSU and that JBVNL can avail loan in this package to pay the outstanding dues.

 What was the state government’s reply?

The state government denied the outstanding dues as Rs 5608.32 crore. A letter sent by the government in response pointed out that the minutes of the meetings between DVC and JBVNL—held on March 14, 2020—where total outstanding was supposed to be recalculated after adjustment of Rs 1152.34 crores, a disputed amount. Also, the total outstanding dues as per the state government was Rs 3919.04 crore. The letter also said that the DVC is required to pay Rs 360.36 crore to the state government for conducting mining activity. The net outstanding undisputed dues of DVC arrives to Rs 3558.68 crore, the state government said. The letter further stated that JBVNL has been facing the issue of stressed financial position and the pandemic lockdown has further aggravated the situation. The letter added that JBVNL has proposed availing of a loan of Rs 1841 crore under the AtmaNirbhar package. (It was later postponed by the cabinet).

So, what was the need to exit from TPA?

More than Rs 1,400 crore has already been deducted from Jharkhand’s RBI account. Principal Secretary Energy Avinash Kumar said the state government had decided to exit in the interest of state’s financial health and for the welfare of the people. He added that the money currently being deducted is from the consolidated fund, which has been given by the centre for various developmental schemes such as the 15th Finance commission among others.

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