UDAY covers 97% of discom debt

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  • The Union Ministry of Power has announced that about 97% of the total outstanding debt of all state power distribution companies (discoms) has been covered under the Ujwal DISCOM Assurance Yojana (UDAY).
  • 86% of the restructurable debt has been revamped under the scheme till date.
    As on September 30, 2015, the total debt of all state-owned discoms was ₹3.95 lakh crore,” according to a statement by the Ministry of Power.
  • “The 26 states and 1 UT which have joined the UDAY scheme account for total outstanding debt of ₹3.82 lakh crore. Hence, about 97% of the total outstanding debt of all State discoms has been covered under UDAY,” the statement added.
  • The Ministry also added that the total liability opted for restructuring by the states through the issuance of bonds was ₹2.69 lakh crore.

Ujjwal Discom Assurance Yojana:-

  • UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem. It has ambitious target of making all discoms profitable by 2018-19.
  • The scheme will ease the financial crunch faced by power distribution companies, that has impaired their ability to buy electricity.
  • It is based on the premise that it is states’ responsibility to ensure that discoms become financially viable.

Functions:-

  • The State govt. will takeover the discom liabilities over 2-5 year period.
    This will allow discoms to convert their debt into State bond. These bonds will have a maturity period of 10-15 years.
  • It will allow transfer of 75% outstanding debts incurred by stressed discoms to States’ debt, 50% in 2015-16 and 25% in 2016-17.
  • The central government will not include the loans of the discoms in calculation of the state’s deficit till 2016-17.

UDAY may face following challange:-

  • Electricity is not a central subject, states’ cannot be made to participate in the programme.
  • Finding buyers for such bonds might prove difficult, as these would enjoy the SLR status.
  • It has not laid down a specific performance-monitoring and compliance mechanism.
  • It does not cover inadequate investment in network & poor supply, which is essential for reliable and quality supply.
  • No central monetary assistance is provided, rather states’ will be provided subsidised funding from the central govt.’s power schemes as well as priority in supply of coal.