National

AP govt to take over 75% of Discom loans in two tranches within 2 years

V Rishi Kumar Hyderabad | Updated on January 27, 2018

ap-power

To seek sops in Fiscal Responsibility Act under UDAY scheme

With Andhra Pradesh joining the UDAY (Ujwal Discom Assurance Yojana) scheme to ensure operational and financial turnaround of power distribution companies (Discoms), the State government will take over 75 per cent of the Discom debt within two years.

The State Energy, Infrastructure and Investment Department will request the Union Power Ministry to extend the exemption from the limits under the Fiscal Responsibility and Budget Management Act up to financial year 2018-19 under the UDAY scheme, as the takeover of the loans is expected to jack up the cap on borrowing limits.

The State will take over 75 per cent of the Discom debt as on September 30, 2015 over the two years – 50 per cent during 2015-16 and 25 per cent in 2016-17. The State will issue bonds in the market or directly to the respective banks and financial institutions holding Discoms debt.

Roadmap

Proceeds realised from the bonds issue will be transferred to the Discoms, which in turn will discharge the corresponding amount of banks and towards debt, according to an order issued by State Principal Secretary Ajay Jain.

Some of the key aspects of Uday scheme include swapping Discom debt by taking it over. The transfer of funds raised by the State will be as a grant.

In case the State is not able to absorb the interest burden of the entire grant amount immediately, the transfer of grant can be spread over three years. Once the scheme is implemented, the effective rate of interest will be between 8.17 per cent and 8.37 per cent. The Central scheme has been designed to ensure financial and operational turnaround of Discoms. This will be by way of States taking over Discom loans, and in turn getting the benefit of up to five-year moratorium on repayments.

When a State such as AP joins the scheme, it gets the advantage of accessing funds from a number of other Central schemes. Significantly, when the loan burden comes down, Discoms will be in a position to bring down power tariffs, which are otherwise passed on to consumers. AP Discoms have total loans of about ₹14,720 crore as on September 30,2015, wherein the capex loan is ₹3,712 crore, working capital loans ₹8,461.76 crore and the balance of bonds related liability ₹2,546 crore.

Published on July 27, 2016

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