J&K to gain Rs 9,800 crore after joining UDAY

J&K is the ninth state to join UDAY

Jammu & Kashmir (J&K) became the ninth state to sign the memorandum of understanding for power distribution reforms, the Ujwal Discoms Assurance Yojana (UDAY). It’s a tripartite agreement between the Union Ministry of Power, state governments and the discoms. The other eight states are Rajasthan, Uttar Pradesh, Chhattisgarh, Jharkhand, Bihar, Gujarat, Haryana and Punjab. An overall net benefit of approximately Rs 9,800 crore would accrue to J&K by opting to participate in UDAY, by way of savings in interest cost, reduction in aggregate technical and commercial (AT&C) and transmission losses, interventions in energy efficiency, and coal reforms, said the officials.

“With Jammu and Kashmir signing the UDAY MoU, we will be able to tackle 50 per cent of total discom debt in the country,” said P K Pujari, secretary, power.

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“We are committed to improving operation efficiencies through UDAY. The main aim for signing this MoU is to restructure high interest rate of the total discom debt thereby improving the financial condition of state discoms.”

The signing of MoU under UDAY would enable J&K to raise funds at a cheaper rate to clear the outstanding dues of around Rs 3,538 crore of Central Public Sector Undertakings, which would entail an annual saving of Rs 1,200 crore (over four years) towards interest cost to the state.

The reduction in AT&C losses and transmission losses to 15 per cent and four per cent, respectively, is likely to bring additional revenue of around Rs 7,150 crore during the period of turnaround. The scheme would allow speedy availability of power to 108 villages and 356,000 households in the state that are still without electricity, said J&K government officials.

The UDAY, announced last year, envisages financial and operational turnaround of the stressed power distribution companies. Till yet, 16 states have given in-principle approval to join the UDAY. tates have given in-principle approval to join the UDAY.

One of the first steps enlisted in the MoU is takeover of 75% of discom’s cumulative debt – 50% 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% would be issued as sovereign backed bonds by discoms.

Apart from financial improvements, the discoms would need to improve operational efficiency. Major targets being reducing AT&C losses from current levels to 15% 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.