Madhya Pradesh and Puducherry join UDAY power discoms reforms

Madhya Pradesh joined the Ujwal Discoms Reforms Yojana for power distribution reforms, thus taking the total states on board fro centrally sponsored plan to 16 states. Puducherry also joined the bandwagon becoming the first union territory to join UDAY.

The annual saving in the interest cost to the MP discoms would be around Rs 2,215 crore on account of restructuring of the discom debt. The amount of debt being taken over by the state is Rs 26,055 crore, which is 75% of the total discoms' debt of Rs 34,739 crore outstanding as on 30.09.2015.

The scheme also provides for the balance debt of Rs 8,684 crore to be re-priced or issued as state guaranteed discom bonds, at coupon rates around 3 per cent less than the average existing interest rate.

In case of Puducherry, the MoU with the central government under UDAY paves way for improving operational efficiency of the Electricity Department of the Union Territory.

"An overall net benefit of approximately Rs 378 crore would accrue to the UT by opting to participate in UDAY, by way of cheaper funds, reduction in AT&C and transmission losses, interventions in energy efficiency, etc. during the period of turnaround," said a government statement.

UDAY is the restructuring plan of the NDA government to bail out the financially and operationally beleaguered state-owned discoms. One of the first steps enlisted in the MoU is takeover of 75 per cent of discom's cumulative debt - 50 per cent by March 2016 and balance by next year March. States would issue non-SLR SDLs (State development loans) against it at prevailing market rates. The balance 25 per cent would be issued as sovereign backed bonds by discoms.

The second part of the scheme envisages a slew measures to improve operational efficiency. Major targets include reducing AT&C losses from current levels to 15 per cent by 2019. Also, improving collection and billing efficiency, considerably reducing energy theft, reducing gap between ACS and ARR of discoms are also part of the targets. The scheme underlines the need of regular tariff revision and keeping power prices affordable. Once signed, the states will also enjoy rationalised coal supply and central finance assistance.


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel