The Power ministry’s new ambitious plan to revive ailing discoms is a step in the right direction with even private distribution companies expressing willingness to come on board. Provided, of course that all states sign up for it and it is implemented in
SEB restructuring scheme seen till date. It talks about cost-side efficiency such as an immediate reduction of interest service burden, reduction in fuel cost through coal swapping, time-bound loss reduction, etc. On the revenue side, it talks about a strict discipline of quarterly fuel cost adjustment, annual tariff increase, taking regulators on board and finally including discom losses in the Fiscal Responsibility and Budget Management (FRBM) limits for the states.
UDAY focuses on four major initiatives to improve the operational efficiencies of discoms; reduce the cost of power; reduce the interest cost of discoms and enforce financial discipline of discoms through an alignment with state finances. UDAY aims to relieve the heavily debt-burdened power distribution companies of their huge losses and enable them to get fresh loans and become solvent. It also lays out a road map of how this will be achieved. But does this scheme also have the same political risks as the earlier ones?
According to the plan cleared by the Cabinet, states will have to take over 75 per cent of the SEBs’ loans as of 30 September 2015, by FY17-end, and 50 per cent by the end of March 2016 itself. The cost of this takeover will not be factored in for the states’ FRBM limits for the current fiscal and the next. The states will have the facility of a concessional interest rate of about 9 per cent in servicing the loans, compared to the present 13-14 per cent interest rate on SEBs’ outstanding debt.
On their part, having improved their balance sheets, SEBs will sell the rest of their debt as bonds backed by state guarantee. Once 50 per cent of their outstanding loans are taken of, the states’ interest