Govt extends timeline for states to join UDAY scheme

Government on Wednesday extended the timeline for states to join UDAY scheme, meant for the revival of debt-laden discoms, and issue bonds for paying a major part of their outstanding debt during the financial year ending March 2017.

"The Cabinet has approved the proposal to extend timeline for joining UDAY scheme for states," a source said.

This will facilitate all states who want to benefit from the scheme and could not join or issue bonds to pay off discoms' debt due to various reasons such as elections and regulatory approvals, the source added.

Under UDAY, states were required to join the scheme last financial year and issue bonds to pay off discoms' 50% debt in 2015-16. They were expected to issue bonds to pay off additional 25% of discoms' debt in the current financial year.

However, some states could not join the scheme and others could not issue bonds due to delay in regulatory approvals or other reasons like elections. With this decision, these state would be able issue the bonds to pay of 75% of state discoms' during the current financial year itself.

Last financial year, the states issued bonds worth Rs 1 lakh crore to pay off their discoms debt.

UDAY scheme was launched last November to deal with the burgeoning debt of discoms in the country. It was estimated that outstanding debt of discoms has increased from about Rs 2.4 lakh crore in 2011-12 to about Rs 4.3 lakh crore in 2014-15, with interest rates up to 14-15%.

It was also estimated that state discoms suffer a loss of over Rs 60,000 crore every year. The main objective of UDAY is to get these discoms out of the vicious circle of debt and enable them to purchase power to increase consumption in the country.