Press Brief on “Extension of timeline for issuance of Bonds by State Governments under the Scheme UDAY (Ujwal DISCOM Assurance Yojana) for Financial and Operational Turnaround of Power Distribution Companies”
The Union Cabinet in a meeting held today, chaired by Prime Minister Shri Narendra Modi, accorded an extension of timeline for taking over 50% of the Outstanding Debt of DISCOMs, as existing on 30th September, 2015, by States, and borrowings by State of Jammu and Kashmir under UDAY (Ujwal DISCOM Assurance Yojana). The time limits have now been extended by one year from the earlier stipulated date of 31st March, 2016.
UDAY, the most comprehensive power sector reform ever, was conceived to permanently resolve all DISCOM problems – past, present and future. It is a scheme for the operational and financial turnaround of DISCOMs, which are the weakest link in the power value chain. It provides DISCOMs with a clear roadmap and opportunity to become profitable in the next 3 years.
UDAY is an important component of the effort to realise the mission of 24×7 affordable and environment friendly ‘Power for All’. Power, being a concurrent subject, requires the active participation of the States. Though, UDAY is optional, several States/Union Territories have joined or agreed to join the scheme demonstrating its necessity and appeal. However, some States were unable to join the scheme due to time constraints in completing the processes or inability to take major policy decisions such as joining UDAY due to on-going election processes. Extension of the timeline will enable States to participate in this scheme by allowing adequate time to complete the multi-stakeholder process required for joining and/or issuing Bonds. In addition, Jammu & Kashmir will be able to float further Bonds.
As stated, under UDAY, so far 20 States and Union Territories have given their consent to join of which, 12 States, viz, Rajasthan, Uttar Pradesh, Chhattisgarh, Jharkhand, Punjab, Bihar, Haryana, Gujarat, Uttarakhand, Karnataka, Goa and Jammu & Kashmir have already signed MOUs with the Central Government. In the year 2015-16, Bonds worth Rs. 99,541 crore were floated by the participating States to clear 50% of the outstanding debt of States and outstanding CPSU dues in Jharkhand and Jammu & Kashmir. Further, DISCOM Bonds worth Rs. 11,524 crore were floated. In the year 2016-17, Bonds worth Rs. 48,391 crore have been floated by Rajasthan, Uttar Pradesh and Punjab.
The turnaround of DISCOMs is made possible through (i) Improving operational efficiencies of DISCOMs, (ii) Reduction in the cost of power, (iii) Reduction in interest cost of DISCOMs through States taking over 75% of the DISCOM debt, as on 30th September, 2015 over two years, and the rest being re-priced through bonds and loans at lower interest rates, (iv) Enforcing financial discipline on DISCOMs through alignment with State finances.
With the Cabinet decision today, the States shall take over 75% of DISCOM debt as on 30th September, 2015 by 31st March, 2017 by issuing Bonds. This intervention will lower the interest burden of debt and allow States, which could not avail of the opportunity to join UDAY earlier to put DISCOMs reforms on accelerated path. It is a significant step in realising the vision of 24X7 Power for All.