Cabinet to extend timelines for states to join UDAY and reduce financial stress

Cabinet to extend timelines for states to join UDAY and reduce financial stress

In order to facilitate states who want to benefit from the government’s flagship scheme, UDAY—meant for revival of debt-laiden distribution companies, the Cabinet under Prime Minister Narendra Modi on Wednesday will give an extension to the timelines set for states to join the UDAY scheme.

UDAY is power ministry’s flag ship scheme and its extension will help all those states that could not join it and issue bonds to pay off Discoms’ debt due to various reasons such as elections and regulatory approvals.

State Discoms carry a huge debt which are restraining them from further modernisation or expansion of their networks and serve the customers better. By joining UDAY, states will be able to issue bonds and will be able to pay a major part of their outstanding debt during the fiscal ending March 2017.

In a recent meeting with leading banks, union minister of power, coal and renewable energy, Piyush Goyal has also succeeded in convincing banks to buy these bonds issued by Discoms. An extension to the UDAY scheme will help states issue bonds which will have a better market with banks coming on board.

UDAY scheme was launched in November 2015 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.
Under UDAY, states are required to join the scheme last fiscal 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 fiscal.

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However, some states could not join the scheme for various reasons. The decision of the government to extend the timeline for states to join UDAY, states who are yet to join the scheme would be able issue the bonds to pay of 75% of state Discoms’ during the current fiscal itself.

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

 

Anupama Airy
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Anupama Airy

Founder and Editor at EnergyInfraPost
Independent Journalist and Energy Expert.​ (Worked with leading mainline financial and national daily for 23 years.​)​ Also, Guest Contributor with busines​sinsider.in
Currently, Writing a Book for Penguin India Titled Greased Pole:How Politics and Lobbying Stifled India’s Energy Dreams. The author can be reached on anupama.airy@gmail.com (9810661825)​
Anupama Airy
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