Tamil Nadu joins UDAY, to save Rs 11,000 crore

Tamil Nadu today joined the UDAY scheme, meant for revival of debt stressed discoms, which would help the State save around Rs 11,000 crore during the 3-year turnaround period.
Tamil Nadu also became the 21st State to join Ujwal DISCOM Assurance Yojana (UDAY) Scheme, and its discom -- TANGEDCO -- today inked a Memorandum of Understanding with Power Ministry for operational and financial turnaround of the utility.
With the addition of Tamil Nadu, UDAY has now covered almost 90 per cent of total utilities' debt of around Rs 4 lakh crore.
Power Minister Piyush Goyal presided over the function to ink MoU with the State and its discom TANGEDCO. The signing ceremony was held in the presence of Tamil Nadu Electricity, Prohibition & Excise Minister P Thangamani.

Tamil Nadu would derive an overall net benefit of about Rs 11,000 crore through UDAY, by way of savings in interest cost, reduction in AT&C and transmission losses, interventions in energy efficiency, coal reforms etc, a Power Ministry statement said.
By signing the MOU under UDAY, the State is taking over 75 per cent of debt of Rs 30,420 crore of TANGEDCO. The scheme also provides for the balance debt to be re-priced or issued as State guaranteed Discom bonds, at coupon rates around 3-4 per cent less than the average existing interest rate.

The State would have savings of about Rs 950 crore in annual interest cost through reduction of debt and through reduced interest rates on the balance debt.

Tamil Nadu and TANGEDCO have committed to bring about operational efficiency. The reduction in AT&C losses and transmission losses to 13.5 per cent and 3.7 per cent respectively, is likely to bring additional revenue of around Rs 1,601 crore to TANGEDCO.
Demand side interventions in UDAY, such as usage of energy-efficient LED bulbs, would help in reducing peak load, flatten load curve and help in reducing energy consumption in Tamil Nadu. The gain is expected to be around Rs 2,304 crores.
The Centre would also provide incentives to the State and the discom for improving power infrastructure and lowering the cost of power.

Tamil Nadu will also be supported through additional coal
at notified prices and in case of availability through higher capacity utilisation, low cost power from NTPC and other CPSUs. Other benefits such as coal swapping, coal rationalisation, correction in coal grade slippage, availability of 100 per cent washed coal would help the State to further reduce the cost of power.
The State would gain around Rs 4,320 crore due to these coal reforms.
The turnaround, to be implemented via financial and operational efficiencies, is expected to improve TANGEDCO's rating, which would in turn help in raising cheaper funds for future capital investment requirement. This is expected to provide interest cost saving of around Rs 60 crore for TANGEDCO in 3 years.

The ultimate benefit of signing the MOU would go to the people of Tamil Nadu. Higher demand for power from DISCOMs would mean higher Plant Load Factor (PLF) of generating units and therefore, lesser cost per unit of electricity thereby benefitting consumers.
Availability of 24x7 power for all would increase the economic activity and improve employment opportunities in the State.
UDAY was launched by the Centre on November 20, 2015 as a sustainable solution for the debt-ridden distribution utilities.