States could get more time to issue bonds under the UDAY (Ujwal DISCOM Assurance Yojana) scheme.

Fearing that a glut of power sector bonds could hamper borrowing plans of the States and the Centre as well as impact the financial restructuring scheme of electricity distribution utilities, the government proposes to extend the timeline.

“There has to be enough appetite for these bonds. Though they are to be privately placed, they should also not hamper the bond issuance programmes of the Centre or private players,” said a senior government official privy to the development.

Sources said the Power Ministry has also finalised a proposal seeking extension of the timeline for issuance of UDAY bonds by States. It is expected to be taken up soon by the Cabinet Committee on Economic Affairs.

Under the scheme, States are expected to issue bonds of about ₹4 lakh crore – or 75 per cent of the outstanding debt of discoms. Eight of the 19 States under the scheme have already issued bonds of nearly ₹1 lakh crore in 2015-16.

Out of the 19 States that agreed to join the UDAY, so far 10 have signed formal agreements and eight have issued bonds.

“This is primarily to ensure there is no glut in the number of bonds that will be issued. We want to keep some flexibility as there are at least 11 more States that will issue bonds very soon. States are coordinating directly with the Reserve Bank of India for permission to issue the bonds but to my knowledge so far none of the States have specifically asked for more time,” said a senior Power Ministry official.

The Finance Ministry is also in favour of this proposal and said if the timeline is extended it would not impact the borrowing plan for this fiscal.

Under UDAY, States take over 75 per cent of Discom debt as on 30 September 2015 in a phased manner over two years. The electricity distribution utilities issue state government backed Discom bonds for the remaining 25 per cent of the debt. In all, 50 per cent of the Discom debt is to be converted to bonds by March 31, 2016 and the remaining by March 2017.

Need for flexibility Piyush Goyal, Minister of State (Independent Charge) for Power, Coal and New & Renewable Energy, said in January that the government is open for having some flexibility in the issuance of bonds.

“If there is a spill over, we do have some flexibility. Some States have very large exposures.

“For such States we have an open mind and can look at possibly stretching the timelines,” he had said.

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