Tamil Nadu on Monday formally joined the Ujwal Discom Assurance Yojna (UDAY), ending speculation on whether the State would abide by the Centre’s package for reviving State-run electricity distribution utilities.

With this, it expects to lower the debt of Tangedco, the State-run power generation and distribution company, in FY16 and FY17.

Tamil Nadu had earlier made certain demands, including relaxation of the FRBM ( Fiscal Responsibility and Budget Management) norms, which the Centre has been unwilling to do.

Officials declined comment when asked what had prompted the change in the State’s stance in the last one year or so.

Former Chief Minister J Jayalalithaa had sought a 15-year relaxation in FRBM, claiming that the debt takeover would affect the State’s fiscal deficit during the entire tenure of the bond.

At the signing of the MoU here, Minister of State (Independent Charge) for Power, Piyush Goyal, said that no FRBM relaxation has been allowed under UDAY for Tamil Nadu.

“I had explained to the then Chief Minister that the interest saving that will accrue to the State on this ₹30,000 crore (debt which the State will take over) will be more than ₹1,000-odd crore every month. That is a straight benefit to the State, sector and the people of Tamil Nadu. Today, the Discom’s losses are being paid by the State government’s treasury. So by taking over a part of the loan, the State is saving money.”

Tamil Nadu had also wanted 25 per cent of the debt taken over to be treated as assistance from the Centre, similar to the Financial Restructuring Programme, which was implemented in 2012.

However, Goyal said, “The concession given under the earlier programme was a mirage. Not one State in the country could benefit from this as none of the States could fulfil the conditions under it.”

Tamil Nadu’s Minister for Electricity, Prohibition and Excise, P Thangamani said, “Tangedco’s total loan outstanding as on September 30, 2015, was ₹81,312 crore… (Of this) distribution-related loans are ₹36,833 crore.”

Under UDAY, 75 per cent of the distribution-related loans are to be taken over by the State government. The scheme then allows for bonds to be issued against them to raise fresh capital.

According to Thangamani, Tangedco incurred a loss of ₹12,756 crore in 2014-15, which fell by about half to ₹ 5,786 crore in 2015-16.