What is Ujwal DISCOM Assurance Yojana?

Ujwal DISCOM Assurance Yojana

Ujwal DISCOM Assurance Yojana is a scheme launched in November 2015 by Piyush Goyal. Piyush Goyal is Minister of State (IC) for Power, Coal & New and Renewable Energy (Now Railway minister and coal minister). This scheme is optional for the states to join.

The first state who joined this yojana was Jharkhand. Other states which have come together are Gujarat, Chhattisgarh, Andhra Pradesh, Karnataka, Rajasthan, Punjab, Haryana, Jammu and Kashmir, Himachal Pradesh, Madhya Pradesh, Uttarakhand, Telangana, Assam.

Ujwal DISCOM Assurance Yojana (UDAY) is the financial turnaround and revival package for electricity distribution companies of India (DISCOMs) pushed by the Government of India with the intent to find a permanent solution to the financial mess that the power distribution is in. It allows state governments, which own the DISCOMs, to take over 75 percent of their debt as of September 30, 2015, and pay back lenders by selling bonds. DISCOMs are anticipated to issue bonds for the remaining 25 percent of their debt.

Not long ago Uttar Pradesh, Bihar, Maharashtra, Tamil Nadu, and Mizoram joined, thereby making the total of 27 states to have joined. Till November 2017, only states that have not taken part in it are Odisha and West Bengal. Lakshadweep joined the scheme on 28 February 2018, bringing the entire of states and Union Territories covered to 32.

Results of the Scheme:

  •  Financially & Operationally good DISCOMs
  •  Growing demand for power
  •  Advancement in PLF of generating plants
  •  Decreasing in stressed assets
  •  Availability of low-priced funds
  •  Growing capital investment
  •  Development of Renewable Energy sector

Benefits to the Participating States:

  •  Reduction in Cost of power through Central Support
  •  Growing supply of domestic coal
  •  Fixing of coal linkages at notified prices
  •  Coal price rationalization
  •  Coal linkage rationalization & permitting coal swaps
  •  Providing of washed & crushed coal
  •  Additional coal at notified rates
  •  Faster completion of Interstate Transmission lines
  •  Power purchase through transparent competitive bidding

Salient Features of the Scheme:

For Financial Turnaround

States will purchase 75% of the DISCOM debt as on Sept 30, 2015 – 50% in FY 2015-16 and 25% in FY 2016-17.

  •  States to give non-SLR including SDL bonds, to take over debt and transfer the proceeds to DISCOMs in a mix of grant, loan, equity.
  •  The maturity period of bonds – 10-15 years.
  •  Moratorium period – up to 5 years.
  •  Rate – G-sec plus 0.5% spread plus 0.25% spread for non-SLR.
  •  Taking not to be included for calculating the fiscal deficit of the State.

Achieving Financial Turnaround

Balance 25% of debt to remain with the DISCOMs in the following manner:

1.            Issued as State-backed DISCOM bonds; or

2.            Re-priced by Banks/FIs at an interest rate not more than bank base rate + 0.10%

States to take over future losses of DISCOMs as per trajectory in a graded manner.

[0% of loss of 14-15 & 15-16; 5% of 16-17; 10% of 17-18; 25% of 18-19 & 50% of 2019-20]

Balance losses to be financed by State bonds or DISCOM bonds backed by State Govt guarantee, to the extent of loss growing finalized with MoP.

Jharkhand and J&K given particular dispensation for taking over of outstanding CPSU dues

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