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The Finance Ministry has given permission to Uttar Pradesh, Rajasthan, Jharkhand and Chhattisgarh to issue the bonds as part of the Ujwal DISCOM Assurance Yojana (UDAY).
“In the case of four States, the Ministry of Finance has already approved the issuing of certain amount of bonds. They are in dialogue with the Reserve Bank of India to carry that process forward,” said Piyush Goyal, Minister of State (Independent Charge) for Power, Coal and New & Renewable Energy, on Wednesday.
“The Ministry of Finance and the RBI are working out the mode of these bond issues along with the States. Some may want to offer it to the market, some banks want to take it up themselves without offering it to the market because the pricing is quite attractive, some States want to offer it to LIC and provident funds,” he added without elaborating on the timeline for the issuance of these bonds.
Under the UDAY scheme, State governments take over 75 per cent of the debt of the distribution utilities. This is then issued as non-SLR (statutory liquidity ratio) bonds. The remaining 25 per cent of debt with electricity distribution utilities is also refinanced through Stategovernment-backed DISCOM bonds.
Jharkhand, Chhattisgarh, Rajasthan and Uttar Pradesh account for around Rs. 1.5 lakh crore or about 35 per cent of the outstanding loans of State electricity distribution utilities in the country.
Six States have already signed agreements to finalise their participation in the UDAY scheme including Bihar. “Tripura and Manipur have also agreed to join the scheme. Seventeen States have agreed to join the scheme, some have signed the agreements and the others are preparing them,” said Goyal.
Elaborating on the Union Budget 2016-17 announcements on the power sector, he said, “Finance Minister Arun Jaitley has amended Section 3 of the Central Sales Tax (CST) Act and brought in an explanation to ensure that gas transmission from one state to another will attract VAT only at CST rate of two per cent.”
“The problem was that when gas was transmitted through the pipeline crossing States, it attracted VAT at all those States. This has now been permanently resolved with the explanation that the Finance Minister has brought in and the gas pooling scheme for power plants will get a further push,” he added.
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