UDAY, the big economic intervention of the Modi government to treat discom health, is proceeding apace. Thus far, ten states alongwith their discoms have entered into MoUs with the union power ministry, each making certain commitments aimed at the turnaround of discoms. Out of these ten states, discoms in seven states had massive debts – Rs 201,242 crore. Half of this has now been funded through issuance of bonds by the states, at interest rate fixed at the bank base rates plus 0.1 per cent.
Bonds are being issued at above stated rates by concerned states for 75 pc of the debt held by their discoms and the remainder 25 per cent of the debt will be covered by discoms selling state guaranteed bonds. In the absence of demand for these bonds, states will sell to the Banks & FIs in the ratio the money was borrowed from them. And this is what is being done. For the discoms the interest rates will go down, relieving the pressures on tariff and for the stressed Banks & FIs, there is a concrete repayment schedule, although at basic interest rates.
UDAY is not only a scheme for debt restructuring but also brings to bear upon the discoms the responsibility to cut their losses and follow a road map for tariff hike. Discoms will have to self-administer fiscal discipline in their conduct as no loan cushions will be given for operations. Banks and FIs will not advance short-term debt to discoms for financing losses. Nor will Operational Funding Requirement be extended by states to discoms in perpetuity but support shall be provided only to enable them and only till such time that the discom achieves turnaround. At the same time pendency of outstanding dues from state government departments to discom for electricity supply is to be removed. These factors are necessary for the success of UDAY; they are also its greatest risks.
For the discoms, an elaborate task list has been cut out. This can be broadly classified under three categories – Technical-Commercial & Managerial Efficiency, Financial Discipline and Customer Facing Behaviour. Thus, discoms have been given a target of reducing AT&C losses to 15 pc, elimination of gaps between ACS & ARR after subsidy adjustments for any category of consumers, and power procurement through competitive bidding. KPIs have been devised for officers to account for fulfillment of technical targets and billing efficiency. Included in this, is also the rollout of smart meter installation for all, to be realizable by 2019.
All told, UDAY was announced in November 2015, as a bailout programme of India’s almost-bankrupt state-owned discoms that are weighed down by Rs 4.3 lakh crore of collective debt and Rs 3.8 lakh crore of losses and can’t even afford to buy electricity from power generators. It might well turn out to be the biggest modernization event, provided the political interferences are warded off.
