UDAY helps reduce subsidy dependence of power discoms

Rajasthan, Haryana, Andhra, Chhattisgarh, MP and Bihar have reduced their subsidy

The Centre’s power distribution reforms scheme, Ujwal Discom Assurance Yojana (UDAY), has helped discoms reduce their subsidy dependence on state governments owing to improved liquidity position, a report released by the Rural Electrification Corporation (REC) said on Wednesday.

State-owned power distribution companies of Rajasthan, Haryana, Andhra Pradesh, Chhattisgarh, Madhya Pradesh and Bihar have reduced their subsidy, booked as percentage of the revenue, in the range of 5-10 per cent in the current financial year, said REC, a listed navratna public sector enterprise under the ministry of power that monitors UDAY performance.

States like Andhra Pradesh, Bihar, Assam, Haryana and Jharkhand reduced power purchase cost up to 35 paise, 16 paise, 12 paise, 10 paise and 8 paise per unit, respectively, in the October-December quarter of 2016-17, compared to the same period the previous year.

“UDAY is the most comprehensive power sector reform ever planned and executed in the country. It is a classic example of comprehensive, cooperative, collaborative, competitive, consensual and compassionate federalism,” Union power minister Piyush Goyal said. Of the 26 states that have joined UDAY, 15 states have issued bonds against the debt of the discoms that they took over as part of the restructuring. The total amount of bonds issued is Rs 2.09 lakh crore by the states and Rs 0.24 lakh crore by the discoms.

For these states, one of the first steps was to take over 75 per cent of discom debt as on September 30, 2015 over two years -- 50 per cent in 2015-16 and 25 per cent in 2016-17. These states would then issue bonds in market to capitalise on it. The 25 per cent of debt remaining with discoms was issued separately by discoms with sovereign guarantee.

“We have a deep focus on monitoring and accountability and are working towards a clear strategy with visionary goals for which the road map has been drawn with a view to bring in efficiency in the whole power sector value chain,” said Goyal.

Power ministry officials said interest rates for the bond issued by the states are in range of 7.04-8.68 per cent while the bonds by discoms had interest rate of 9.75 per cent.

Debt refinancing may lower discom losses: ICRA

ICRA on Wednesday said it is expecting debt refinancing by state governments under UDAY will lower the losses of discoms from Rs 67,000 crore in FY15 to Rs 37,500 crore in FY2017.

The progress in implementation of the scheme has been satisfactory with 22 states and union territories (UT) joining the scheme and 13 of these states issuing bonds worth Rs 2.32 lakh crore as on date towards refinancing the debt on the books of the state-owned distribution utilities (or discoms), ICRA said in a statement. (With PTI inputs)