Cabinet clears financial ‘reform’ package for discoms : UDAY


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Aug 17, 2009
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by The Hindu November 5, 2015, 5:55 PM

The Union Cabinet on Thursday approved a ‘reform’ package for loss-making electricity utilities, allowing for the transfer of 75 per cent of the about Rs 4.3 lakh crore outstanding debt incurred by stressed discoms to States’ debt.

The scheme, named Ujwal Discom Assurance Yojana (UDAY), will be optional for States. The electricity distribution firms in the states of Rajasthan, Uttar Pradesh, Tamil Nadu and Haryana are among the most stressed and have run up the maximum losses. Announcing the Cabinet decision, Union Power Minster Piyush Goyal told reporters that the Centre aims to help states in wiping out the discoms’ losses by 2019.

“States shall take over 75 per cent of discom debt as on September 30, 2015 over two years — 50 per cent of discom debt shall be taken over in 2015-16 and 25 per cent in 2016-17,” an official release said. The decision is also expected to help the banks in managing their bad loans.

Mr.Goyal added that the Government will not include in the calculation of fiscal deficit of respective States in the financial years 2015-16 and 2016-17 the debt taken over by them under the scheme.

The future losses of Discoms States will take over in a graded manner all the way up to 2020-21.

The balance discom debt outstanding with banks not taken over by States will be converted into loans or bonds. The bonds will carry interest rate of not more than the bank’s base rate plus 0.1 per cent, the release said. “Alternately, this debt may be fully or partly issued by the Discom as State guaranteed Discom bonds at the prevailing market rates which shall be equal to or less than bank base rate plus 0.1 per cent,” it added.

States accepting UDAY and performing as per operational milestones will be given additional / priority funding through Deendayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme, Power Sector Development Fund (PSDF) or other such schemes of Ministry of Power and Ministry of New and Renewable Energy.

States not meeting the operational milestones will be liable to forfeit their claim on IPDS and DDUGJY grants.

States which want to take up the rescue package will sign agreements with the power ministry. Mr. Goyal said that the Centre is in talks with several states for such MoUs. Talks with Rajasthan government have reached finalisation stage, he said. These states shall also be supported with additional coal at notified prices and, in case of availability through higher capacity utilization, low cost power from NTPC and other Central PSUs.


friends its good strategy/step to force states to get bad Laon of discoms.wont it add to their fiscal deficit irrespective of whether central gov takes into account fiscal deficit of state opting form UDAY

Also those states donot perform as per operational milestone wont get grants from IPDS and DDUGJY. Seriuosly is this some kind of punishment .its not like giving looipop to kid

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