UP to issue Rs 10,000 cr of bonds against discoms' debt

This is the second issuance by the state under the provisions of UDAY

One of the largest indebtors in the power distribution sector, Uttar Pradesh will issue bonds worth Rs 10,000 crore against the debt of its discoms which it took over.

This is the second issuance by the state under the provisions of the Ujwal Discoms Assurance Yojana (UDAY) agreement, which aims to restructure the financials of beleaguered power distribution companies.

Uttar Pradesh was the first state to issue bonds during the past financial year. Till July last year, it had issued bonds totalling Rs 24,000 crore in three tranches. India Ratings and Research (Ind-Ra) assigned UP Power Corporation’s proposed bonds the rating of ‘Provisional IND AA(SO)’- outlook stable.

“Although UP is the one of the most indebted states compared with peer states owing to high developmental needs, its debt burden (debt/gross state domestic product) has declined since FY04 (26.8 per cent in FY15 (RE); 46.7 per cent in FY04). Fiscal deficit (excluding UDAY), too, improved, declining to 2.97 per cent in FY16 (RE) from 7.33 per cent in FY04”, said Ind-Ra.

The UP government, Ministry of Power and Uttar Pradesh Power Corporation (UPPCL) entered into a tripartite memorandum of understanding for availing the UDAY benefits, past year. 

Under the scheme, 50 per cent of UPPCL’s debt of Rs 54,000 crore was taken over by the UP government by FY16 and the remaining 25 per cent was taken over on July 4 , 2016. 

Under the scheme, UPPCL is to fund its operational losses post October 2015 through the issuance of bonds backed with a GoUP guarantee or by GoUP-guaranteed bonds issued with the proviso of direct deduction from the GoUP account with the RBI in the event of default.