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

Power Watch India - - COVER STORY -

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

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