States get more time to adopt power utility rescue scheme

States that join the UDAY have time till the end of this financial year to take over 75% of the outstanding debt of power utilities


Finance minister Arun Jaitley says that the states that could not sign the agreement last financial year can now come on board. Photo: Mint
Finance minister Arun Jaitley says that the states that could not sign the agreement last financial year can now come on board. Photo: Mint

New Delhi: The union cabinet on Wednesday decided to extend the deadline for states to join the Ujwal Discom Assurance Yojana (UDAY), which allows them to take over the debt of ailing state power utilities, by one year till 31 March, 2017.

So far, 10 states have signed agreements with the central government to take over the outstanding debt of their power distribution companies. Another nine are in discussions with the Centre, but since the original deadline for taking over half of the utility’s outstanding debt had expired on March 31, 2016, an extension was necessary for more states to join the scheme.

States that join the scheme have time till the end of this financial year to take over 75% of the outstanding debt of utilities—the maximum that states are allowed to take over under the scheme, according to an official statement issued after a cabinet meeting.

Finance minister Arun Jaitley told reporters that the states that could not sign the agreement last financial year can now come on board.

The scheme announced on 5 November by the central government had specified that half of the outstanding debt was to be acquired in 2015-16 and another 25% in 2016-17. The remaining 25% will be refinanced through state-guaranteed discom bonds. As on September 30, 2015, distribution companies had a collective outstanding debt of Rs.4.3 trillion.

In 2015-16, participating states raised Rs.99,541 crores through UDAY bonds to take over half of the debt of their respective utilities. Power distributors in the meanwhile have issued bonds worth Rs.11,524 crores to refinance some of the debt. Rajasthan, Uttar Pradesh, Chattisgarh, Jharkhand, Punjab, Bihar, Haryana, Gujarat, Uttarakhand and Jammu & Kashmir are already part of the scheme, said the statement.

UDAY also has set efficiency improvement milestones for distribution companies. The restructuring of debt along with higher operational efficiency from cutting power theft and efficient billing is expected to bring distribution companies out of revenue losses.

UDAY, when completely implemented, is expected to improve demand for power from generation companies that are at present functioning way below their full capacity.

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