UP becomes first non-BJP state to sign MoU for UDAY

UP, with its five distribution companies, has a total debt exposure of Rs 53,200 crore

Uttar Pradesh has become the first non-Bharatiya Janata Party (BJP) state to sign an agreement for the central government power reform plan —Ujwal Discoms Assurance Yojana (UDAY).

UP, with its five discoms, has a total debt exposure of Rs 53,200 crore outstanding as on November 2015, will now be restructured under UDAY.

The UP government will take over 75 per cent of the total discom debt totalling Rs 39,900 crore, outstanding as on September 30, 2015. The balance debt of Rs 13,300 crore will be re-priced as state guaranteed discom bonds, at coupon rates around three per cent less than the average existing interest rate, said the state government officials.

“The annual saving in the interest cost to the discoms would be around Rs 1,600 crore on account of state take-over of debt and reduction in interest rates on the balance debt,” said the official.

For the states that sign up for UDAY, one of the first steps is 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.

The reduction in AT&C losses and transmission losses to 15 per cent and 3.95 per cent respectively is likely to bring additional revenue of around Rs 17,700 crore during the period of turnaround of the discoms.

The agreement cum MoU was signed between the union ministry of power, state government and the five discoms  —  Dakshinanchal Vidyut Vitran Nigam Limited, Kanpur Electric Supply Company Limited, Madhyanchal Vidyut Vitrran Nigam Limited, Paschimanchal Vidyut Vitran Nigam Limited and Purvanchal Vidyut Vitran Nigam Limited.

UP is the fourth state to sign the MoU after Rajasthan, Chhattisgarh and Jharkhand. The total states that have given in-principle approval of joining the UDAY reforms are now 15.

The MoU lists out a slew of central sponsored funds for the discoms if they meet the required operational efficiency. The parameters are divided into three parts -- financial, operational and monthly monitoring.

There is close to 15 guidelines each for financial and operational efficiency which the states need to adhere to meet the stipulated targets. The parameters and the performance of the discoms would be made public.

The monitoring of the states would be done by joint committee with representation from ministry of power and all its subsidiaries, ministry of finance, state government and its energy department and representation from public sector banks and financial institutions.