NEW DELHI: A rescue package for ailing
electricity utilities, called ‘Ujwal DISCOM Assurance Yojna’ or UDAY, was
approved by the Cabinet on Thursday. The scheme stipulates passing on discom
debts in their entirety to the respective States over two years.
Under the scheme,
States will take over 75 per cent of the debt as on September 30, over two
years — 50 per cent in 2015-16 and 25 per cent in 2016-17.
Ensuring that the
Centre’s finances are not impacted, the scheme stipulates that the debt taken
over by the States will not be included by the Centre when calculating the
fiscal deficit of respective States in fiscal years 2015-16 and 2016-17.
To take over the
debt, the States will issue non-SLR (statutory liquidity ratio) bonds either in
the market or directly to the bank/financial institution (FI).
The discom debt not
taken over by the State would be converted by the banks/FIs into loans or bonds
bearing an interest rate not more than the bank’s base rate plus 0.1 per cent.
Or, this debt may be fully or partly issued by the utilities as State
guaranteed discom bonds, at market rates.
The package also
involves States taking over the future losses of discoms in a graded manner and
funding them from 2017-18 (5 per cent of the loss of 2016-17); 2018-19 (10 per
cent of the loss of 2017-18); 2019-20; (25 per cent of the loss of 2018-19);
2020-21 (50 per cent of the 2019-20 loss).
The discoms will
break-even through four initiatives — improving operational efficiencies;
reduction in power cost; reduction in interest cost; and enforcing financial
discipline through alignment with State finances.
Discoms had
accumulated losses of approximately Rs. 3.8-lakh crore and debt of nearly Rs. 4.3-lakh crore as of March 2015.
Power producers and
bankers are waiting for the fineprint before they react to Power and Coal
Minister Piyush Goyal’s package.
State discoms will
comply with the Renewable Purchase Obligation outstanding since April 2012,
within a period to be decided in consultation with the Power Ministry. Goyal
said, “Due to legacy issues, discoms are trapped in a vicious cycle with
operational losses being funded by debt. The debt of discoms has increased from
about Rs. 2.4-lakh
crore in 2011-12 to about Rs. 4.3-lakh crore in
2014-15, with interest rates up to 14-15 per cent.”
The success of this
scheme will largely depend on the States’ willingness to adopt it. Goyal said
the scheme also gives enough incentives to States to adopt it. Those accepting
it will be given additional/priority funding through Deendayal Upadhyaya Gram
Jyoti Yojana, Integrated Power Development Scheme, Power Sector Development
Fund or such other schemes of the Ministries of Power and New and Renewable
Energy.
Such States shall
also be supported with additional coal at notified prices and, in the case of
availability through higher capacity utilisation, low-cost power from NTPC and
other Central PSUs. States not meeting operational milestones will be liable to
forfeit their claim on such grants.