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Home News Power Sector News Under UDAY, states took over Rs 2 lakh cr discom debt, leading to Rs 11,989 cr savings

Under UDAY, states took over Rs 2 lakh cr discom debt, leading to Rs 11,989 cr savings

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UDAYThe governments of 16 states have taken over around Rs 2.08-lakh-crore debt of electricity distribution companies (discoms) as per the terms of the Ujwal Discom Assurance Yojana (Uday). This helped in lowering of interest rates to 7-8.5% from around 11-12%, resulting in Discoms saving Rs 11,989 crore till December 2016. Experts believe that though such measures are helping discoms turn around, it is putting palpable financial pressure on the states. Analysts believe that these developments would contribute in raising the fiscal deficit of the states.

SBI Ecowrap, a research note published by the SBI Corporate Centre, said the impact of farm loan waiver and Uday will push the states' fiscal deficit upwards, making it an uphill task for them to adhere to the 3% limit set by the Fiscal Responsibility and Budget Management Committee. "We estimate that out of 29 states, after the implementation of loan waiver and Uday. only eight states will have less than 2.5% fiscal deficit," SBI Ecowrap noted.

Under Uday, state governments are required to take over 75% of short-term liabilities of their respective discoms (as in September-end 2015), 50% in the first year (FY16) and the balance in FY17. The accumulated losses of discoms stood at a staggering Rs 3.8 lakh crore at the launch of Uday. Their outstanding debt then stood at Rs 4.3 lakh crore. Research firm ICRA estimates that the overall subsidy dependence of state-owned power distribution utilities (discoms) for FY18 would increase annually by about 7-8% to around Rs 81,000 crore.

Sabyasachi Majumdar, senior vice-president of the agency, believes that the higher dependence is "predominantly driven by the subsidy and concessional tariff structures designed by state governments for certain consumer categories, and the estimated higher level of consumption by subsidised consumer categories". However, ICRA also said Uday has improved the liquidity profile of discoms to some extent and expects book losses of discoms on a national level to decline from Rs 60,000 crore in FY16 to Rs 35,000 crore in FY18.

Performance of several state discoms has seen an improvement since they signed up for the Uday. As reported earlier by FE, narrowing of the gap between the discoms' average cost of supply (ACS) and average revenue realised by Rs 0.07/unit in FY17 resulted into savings of more than Rs 7,900 crore. According to sources, the overall power purchase cost has reduced from Rs 4.20/unit in FY16 to about Rs 4.16/unit in FY17.

Electricity purchase cost in Telangana fell to Rs 4.66/unit in FY17 from Rs 5.07/unit in FY16. Similarly, Goa's power purchase cost fell nearly 15% to Rs 2.85/unit in the same period. The average aggregate technical and commercial (AT&C) losses for all Uday states have come down by about four percentage points to 20.2%.

Source- Indian express


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