17 States Ready to Join UJWAL Discom Assurance Yojana (UDAY)

17 States Ready to Join UJWAL Discom Assurance Yojana (UDAY)

The Ujwal DISCOM Assurance Yojana (UDAY) was launched by the Government of India on 20-11-2015 for operational and financial turnaround of State owned Power Distribution Companies (DISCOMs).

The Scheme aims to reduce the interest burden, reduce the cost of power, reduce power losses in Distribution sector, and improve operational efficiency of DISCOMs.

Under the UDAY scheme, State governments take over 75 per cent of the debt of the distribution utilities. This is then issued as non-SLR (statutory liquidity ratio) bonds. The remaining 25 per cent of debt with electricity distribution utilities is also refinanced through Stategovernment-backed DISCOM bonds.

So far, 17 States have given their ‘in-principle’ approval to join the Scheme UDAY. Out of these, the States of Chhattisgarh, Bihar, Jharkhand, Gujarat, Rajasthan and Uttar Pradesh have already signed MoUs under UDAY.

The Scheme incentivizes the States by exempting State takeover of DISCOM debts from Fiscal Responsibility and Budget Management (FRBM) limits for two years; increased supply of domestic coal; coal linkage rationalization; liberally allowing coal swaps, allocation of coal linkages to States at notified prices and additional/priority funding in Schemes of Ministry of Power and Ministry of New & Renewable Energy, if they meet the operational milestones in the Scheme.

Participating States along with the DISCOMs have to enter into MoU with Government of India and take over 50% of outstanding debt as on 30-09-2015 by 31st March, 2016.

Power, coal and RE minister Piyush Goyal recently said the Finance Ministry has given permission to Uttar Pradesh, Rajasthan, Jharkhand and Chhattisgarh to issue the bonds as part of the Ujwal DISCOM Assurance Yojana (UDAY).

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“In the case of four States, the Ministry of Finance has already approved the issuing of certain amount of bonds. They are in dialogue with the Reserve Bank of India to carry that process forward,” the minister said.

“The Ministry of Finance and the RBI are working out the mode of these bond issues along with the States. Some may want to offer it to the market, some banks want to take it up themselves without offering it to the market because the pricing is quite attractive, some States want to offer it to LIC and provident funds,” he added.

Jharkhand, Chhattisgarh, Rajasthan and Uttar Pradesh account for around ₹1.5 lakh crore or about 35 per cent of the outstanding loans of State electricity distribution utilities in the country.