AP joins UDAY scheme

V Rishi Kumar | | Updated on: Jan 22, 2018

The Andhra Pradesh Government has conveyed to the Ministry of Power (MoP) its in-principle decision to join the UDAY (Ujwal Discom Assurance Yojana) scheme.  

On receiving this official communication from the Andhra Pradesh Government, Piyush Goyal, Minister of State (IC) for Power, Coal and New & Renewable Energy, congratulated Chief Minister of Andhra Pradesh N Chandrababu Naidu for joining UDAY.

In his tweets, Goyal said UDAY has been launched to improve the financial and operational efficiencies of power distribution companies (DISCOMs).

It envisages reducing the interest burden, cost of power, and AT&C losses. Consequently, DISCOM would become sustainable to supply adequate and reliable power, enabling 24x7 power supply.

The scheme provides that States would take over 75 per cent debt of DISCOMS as on September 30, 2015, in two years.

UDAY has in-built incentives encouraging State Governments to voluntarily restructure their debts. These incentives include taking over of DISCOM debt by States outside the fiscal deficit limits; reduction in the cost of power through various measures such as coal linkage rationalisation, liberal coal swaps, coal price rationalisation, correction in coal grade slippage, allocation of coal linkages at notified prices, priority/additional funding through schemes of MoP and MNRE, and, reduction in interest burden.

UDAY is different from earlier restructuring schemes in several ways including flexibility of keeping debt taken over outside the fiscal deficit limit, reduction in cost of power, and a series of timebound interventions for improving operational efficiency. UDAY provides for measures that will reduce the cost of power generation, which would ultimately benefit consumers.

Our Delhi bureau adds: Andhra Pradesh was soon followed by Jharkhand, which has also sent in its in-principle approval to join the scheme. The two states will now sign a memorandum of understanding for the same. The MoU signing is expected to happen soon.

Broadly, under the UDAY scheme, state governments which own the distribution utilities, will take over 75 per cent of the latter's debt as of September 30 and pay back the lenders by selling bonds. For the remaining 25 per cent, discoms will issue bonds.

The Centre will also ease the rules to allow states to borrow more and help them with the additional burden.

Last month, Goyal had said several states had welcomed the UDAY scheme and five-six states are expected to sign MoUs soon.

Published on December 06, 2015
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