Union Cabinet gives nod to UDAY Scheme for financial restructuring package for power DISCOMs

Union Cabinet chaired by Prime Minister Narendra Modi has given its nod Ujwal DISCOM Assurance Yojna (UDAY) for financial restructuring of debt of power distribution companies.
The Scheme aims for financial turnaround and revival of Power Distribution companies (DISCOMs) and also ensures a sustainable permanent solution to the problem.

About UDAY scheme

• Allows power DISCOMs in selected states to convert their debt into state bonds as well as roll out number of measures to improve efficiency at power plants.
• Seeks to ensure that struggling DISCOMs can shake off years of losses and start on a path to profitability.
• Assures the rise of vibrant and efficient DISCOMs: through four initiatives (i) Improve operational efficiencies of DISCOMs (ii) Reduce of cost of power (iii) Reduce interest cost of DISCOMs (iv) Enforce financial discipline on DISCOMs through alignment with State finances.
• Debt Burden: Shifts 75 per cent of power DISCOMs debt burden to states’ balance sheets. This step would result in interest cost savings to the tune of 3-5 per cent.
• State Power Bonds or loans: Selected states would be able to sell the balance 25 per cent as state-backed power bonds or loans which will carry interest rates of g-sec plus 50 basis points.
• Improve operational efficiency: by implementing steps like (i) swapping of coal linkages (ii) monitoring aggregate technical and commercial (AT&C) losses (iii) Focus on smart metering and feeder separation in states.

Thus with nod to UDAY Scheme, Union Government seeks to accelerate the process of reform across the entire power sector in order to ensure affordable and accessible 24×7 Power for All.
The scheme has been framed by Union Power Ministry as power DISCOMs in several states have been severely mismanaged, resulting in a debt burden upward of 4 lakh crore rupees. This has taken a toll on the power as well as bank sectors.

Month: Current Affairs - November, 2015