The state-run Ujwal Discom Assurance Yojna (UDAY) is likely to provide a relief to struggling state-owned discoms to the extent of Rs 80,000 crore per year till FY19. It would translate into a reduction in losses by around Rs 0.95 per unit on an all India basis.

The conversion of discom loans into bonds would lead to capital savings of Rs 12,000 crore for public sector banks. The all-India losses of discoms are estimated at around Rs 62,000 crore for March 31, which were mainly due to poor operational inefficiencies because of high AT&C losses, tariff hikes of the past not being reflective of cost and huge interest burden because losses were being funded by debt.

About Ujwal Discom Assurance Yojna:

Abbreviation: UDAY

Date: 5th November 2015

Approved: Ministry of Power

Function: UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem.

features:

• States shall take over 75% of DISCOM debt as on 30 September 2015 over two years – 50% of DISCOM debt shall be taken over in 2015-16 and 25% in 2016-17.
• Government of India will not include the debt taken over by the States as per the above scheme in the calculation of fiscal deficit of respective States in the financial years 2015-16 and 2016-17.
•  States will issue non-SLR including SDL bonds in the market or directly to the respective banks / Financial Institutions (FIs) holding the DISCOM debt to the appropriate extent.
• DISCOM debt not taken over by the State shall be converted by the Banks / FIs into loans or bonds with interest rate not more than the bank’s base rate plus 0.1%. Alternately, this debt may be fully or partly issued by the DISCOM as State guaranteed DISCOM bonds at the prevailing market rates which shall be equal to or less than bank base rate plus 0.1%.
• State DISCOMs will comply with the Renewable Purchase Obligation (RPO) outstanding since 1st April, 2012, within a period to be decided in consultation with Ministry of Power.
• States accepting UDAY and performing as per operational milestones will be given additional / priority funding through Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY),Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or other such schemes of Ministry of Power and Ministry of New and Renewable Energy.
• Such States shall also be supported with additional coal at notified prices and, in case of availability through higher capacity utilization, low cost power from NTPC and other Central Public Sector Undertakings (CPSUs).
• States not meeting operational milestones will be liable to forfeit their claim on IPDS and DDUGJY grants.
• UDAY is optional for all States. However, States are encouraged to take the benefit at the earliest as benefits are dependent on the performance.