Privately-run power distribution companies in (discoms) Delhi have written to the state government saying that they could bring down power tariff by as much as 75 paise per unit if they are allowed to amortise over Rs 25,000 crore of regulatory assets under the recently unveiled Ujwal Discom Assurance Yojna (UDAY).
Although UDAY is meant for state-owned distribution companies, the discoms in Delhi have urged the state government to take up the suggestion with the Union ministry of power to issue tax-free bonds against existing loans taken by the discoms to bridge the revenue gap.
“Tax-free bonds can be issued by Rural Electrification Corporation (REC) and Power Finance Corporation (PFC) on behalf of the Delhi government at 8% interest rate,” the letter said. It added that the bonds would accrue nearly 4 percentage points in savings on the interest rate which is currently at around 14%.
The letter further suggested that the state government could issue bonds repayable in 10 years for 50% of the regulatory assets. For another quarter of regulatory assets, the government could arrange for loans at the base lending rate, the letter said.