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With the Andhra Pradesh inking pact to join 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.
As a part of the Uday scheme, the State Energy, Infrastructure and Investment Department shall 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, as the takeover of the loans is expected to jack up the cap borrowing limits.
As per the arrangement, the State shall takeover 75 per cent of the Discom debt as on September 30, 2015 over the two years with 50 per cent during 2015-16 and 25 per cent in 2016-17. The States will in turn issue bonds in the market or directly to the respective banks and financial institutions holding Discoms debt. Proceeds realised from issue of bonds shall be transferred to the Discoms, which in turn will discharge the corresponding amount of banks and towards debt, according to an order issued by Ajay Jain, State Principal Secretary.
Some of the key aspects of Uday scheme include swapping Discom debt by taking it over and 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 about 8.17 per cent to 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 5 years of moratorium on principal and repayments. When a State like 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 for Discoms, they would be in a position to bring down power tariffs, which are otherwise passed on to consumers.
AP Discoms have total loans of about Rs 14,720 crore as on September 30,2015, wherein the capex loan is Rs 3,712 crore, working capital loans (Rs 8,461.76 crore) and balance of bonds related liability (Rs 2,546 crore). The arrangement under the scheme leads to swapping of Discom debt by the State, the latter in turn gets the advantage of lower interest rate.
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