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Four months into the current fiscal, these six states, the early birds under UDAY scheme, could not even achieve the AT&C loss reduction target set for the end of last fiscal (see graphic). Signalling that states are not exactly honouring their commitments under the UjwalDiscoms Assurance Yojana (UDAY), at least six of them are trailing the targets for reducing their power distribution companies’ aggregate technical and commercial losses.
According to official data reviewed by FE, as of July 2016, the deviation from the UDAY-mandated AT&C loss reduction trajectory was the most in the case of Rajasthan, Jammu and Kashmir, and Uttar Pradesh, while Jharkhand, Chhattisgarh and Haryana too have a lot to catch up when it comes to adhering to the roadmap.
Four months into the current fiscal, these six states, the early birds under UDAY scheme, could not even achieve the AT&C loss reduction target set for the end of last fiscal (see graphic). Among the eight states that have already issued bonds amounting to R1 lakh crore to their respective lenders under UDAY, only Punjab and Bihar seem on course to achieve the FY17 target for reduction of commercial losses, one of the chief reasons for discoms plunging into losses and debt traps.
In all, 16 states have signed tripartite agreements with the Centre and the discoms under the revival scheme. UDAY has resulted in substantial savings to these eight in terms of their discoms’ borrowing costs.
After joining the scheme, these states had got enough time to implement its parameters including better metering and upgrade of distribution infrastructure in order to cut commercial losses. Most UDAY states have provided a roadmap to cut losses to 15% by FY19. They have also committed to break even by the same time.
States are required to take over 75% of outstanding discom debt as on September 30, 2015, over the following two years — 50% in FY16 and 25% in FY17. The discom debt taken over by the states will be exempt from calculation of the states’ fiscal deficit in FY16 and FY17. The total outstanding debt on the discom balance sheet was Rs 4.3 lakh crore at end-March 2015.
The quantum of interest cost reduction of discoms will depend on whether their outstanding loans are converted into loan, grant or equity. In case outstanding loans are converted into pure loan, the interest cost reduction will be to the extent of the differential between market-based rate loan, ie, 11.5% to interest rate on bonds (8%).
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