1. UDAY scheme deadline may be extended by 1 year

UDAY scheme deadline may be extended by 1 year

The power ministry has floated a Cabinet note to extend the deadline for the UDAY (Ujwal Discom Assurance Yojana) scheme by one year to enable those states that haven’t come on board yet to sign up, sources told FE.

By: and | Published: April 26, 2016 6:42 AM
So far, 10 states, including those with heavily indebted discoms like Uttar Pradesh, Haryana and Rajasthan, have signed the MoUs. Though Tamil Nadu discoms have a huge debt burden of `80,000 crore, the state government has refrained from embracing the UDAY scheme.

So far, 10 states, including those with heavily indebted discoms like Uttar Pradesh, Haryana and Rajasthan, have signed the MoUs. Though Tamil Nadu discoms have a huge debt burden of `80,000 crore, the state government has refrained from embracing the UDAY scheme.

The power ministry has floated a Cabinet note to extend the deadline for the UDAY (Ujwal Discom Assurance Yojana) scheme by one year to enable those states that haven’t come on board yet to sign up, sources told FE.

Since many states have missed the deadline of March 31 to enter into a memorandum of understanding (MoU) with the Centre for the UDAY scheme, the power ministry proposal seeks to allow these states to enter into MoUs in FY17 with the benefit of a two-year exemption to debt taken over by states from the Fiscal Responsibility and Budget Management Act.

So far, 10 states, including those with heavily indebted discoms like Uttar Pradesh, Haryana and Rajasthan, have signed the MoUs. Though Tamil Nadu discoms have a huge debt burden of `80,000 crore, the state government has refrained from embracing the UDAY scheme.

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If the power ministry’s new proposal is accepted by the North Block, it could help Andhra Pradesh, Telangana, Maharashtra, Madhya Pradesh, Karnataka, Kerala and Assam to join the scheme. Power ministry sources have indicated that apart from Tamil Nadu, Assam was the only state keen on joining the scheme for reducing debt burden and interest cost.

However, states like Kerala, Karnataka and Madhya Pradesh were likely to join UDAY only for operational efficiency and related incentives as these discoms have comfortable debt position. Separately, some states with strong financial and low discom debt such as Gujarat may not issue bonds, but have joined the scheme of other incentives from the Centre.

Though no final view has been taken, finance ministry officials reckon that allowing all states or giving state-specific deviations under the scheme could affect the credibility of the scheme.

It could also lead to a liquidity problem for banks as more states issue bonds in the same period.

For availing the benefits under UDAY scheme, the sources said, enough time was given to all states to sign MoUs. However, finance ministry officials are of the view that states who have already signed MoUs should be given an extension to issue bonds over two years, or by FY18 as against the earlier target of FY17.

UDAY was launched on November 20, 2015, to help loss-making power distribution companies (discoms) in the states to come out of a debt trap of `4.3 lakh crore at the end of March, 2015.

State governments which agreed to participate in the scheme would take over 75% of the short-term liabilities of their respective discoms, with 50% in FY16 and remaining 25% in FY17. In response to the scheme, only 10 states have signed MoUs with the Centre while eight have taken over nearly `99,000 crore, or 50% if discoms’ debt by issuing non-SLR bonds on a private placement basis.

  1. K
    K A Prasanna Ananthamurthy
    Apr 26, 2016 at 2:58 am
    Another scam is brewing.
    Reply

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