CRISIL’s report was based on an analysis of discoms in 15 states that account for 85% of the aggregate losses (Reuters )
CRISIL’s report was based on an analysis of discoms in 15 states that account for 85% of the aggregate losses (Reuters )

Power ministry disputes Crisil's concerns on discoms' financial health

  • A Crisil report said that with most states having limited fiscal headroom, continuous financial aid to discoms may be difficult
  • According to the ministry, CRISIL’s analysis discounts the fact that 85,000 crore of discom debt is yet to be converted into grants/equity according to the UDAY timeline

Mumbai: The power ministry has disputed a recent report from credit ratings agency CRISIL that said state electricity distribution companies (discoms) would see their external debt increase to pre-UDAY levels of 2.6 lakh crore by the end of this fiscal.

A tweet from the ministry's official account said CRISIL’s analysis discounts the fact that almost 85,000 crore of discom debt is yet to be converted into grants/equity as per the UDAY timeline. The ministry also said the agency has not accounted for loans from the Centre and counterpart funding loans which may also be converted into grants. Further, according to UDAY provisions, discoms can avail a further 88,000 crore as working capital financing.

The ministry said that since the implementation of UDAY, discoms have proven their ability for tighter fiscal management, needing about 40,000 crore less than what was provided for them.

CRISIL’s report was based on an analysis of discoms in 15 states that account for 85% of the aggregate losses. It said that with most states having limited fiscal headroom, continuous financial support to their discoms may be difficult, which forces these discoms to become commercially viable through prudent tariff hikes and reduction of technical and commercial losses.

UDAY, or Ujwal Discom Assurance Yojana, which was approved by the Union Cabinet in November 2015, sought to financially stabilise discoms by allowing them to convert their debt into state government bonds, subject to certain conditions.

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