‘UDAY’ all the way
Debt refinancing under UDAY is leading to an improved liquidity for the discoms. Book losses in FY2017 estimated to come down to Rs 37,500 crore: ICRA
ICRA estimates the debt refinancing/takeover by state governments to lower the discom book losses from Rs 67,000 crore in FY2015 to Rs 37,500 crore in FY2017. The progress in implementation of the Ujwal Discom Assurance Yojana (UDAY) has been satisfactory with 22 states/ union territories (UT) joining the scheme and 13 of these states issuing bonds worth Rs 2.32 lakh crore as on date towards refinancing the debt on the books of the state-owned distribution utilities (or discoms).
Girishkumar Kadam, Sector Head and Vice President, ICRA Ratings, said, “The debt refinancing under UDAY scheme is resulting into an improvement in the liquidity profile of the discoms in these states and is likely to improve the ability of the discoms to off-take power and pay power generators in a timely manner, going forward.”
ICRA, however, notes that progress in filing of tariff petitions for FY2018 by the state-owned discoms is less than satisfactory with only 16 out of the 29 states having filed so far. While the delay can be attributed to recently-concluded assembly elections in few states, the subsequent delay in issuance of tariff orders continues to be observed in major states like Rajasthan and Tamil Nadu.
The discoms are required to file the tariff petitions by 30 November 2016 as per tariff regulations so that tariff orders could be issued by the State Electricity Regulatory Commissions (SERCs) by 31 March 2017. Out of the 22 states/ UTs that signed up for UDAY, only 14 states/ UTs have filed a tariff petition for FY2018.
Moreover, tariff orders for FY2018 have been issued in only four states as of now namely Manipur, Mizoram, Odisha and Bihar with average tariff hike of 5.6%, 3.6%, 1.4% and 55% (without considering government subsidy; with subsidy tariff hike is lower at 28%) respectively.
“While the SERC in Bihar has allowed a sharp tariff hike for FY2018 even after accounting for the subsidy support - which is a positive regulatory measure, the possibility of a further increase in subsidy support can’t be ruled out so as to avoid a tariff shock to the consumers, in our view. In this context, along with tariff adequacy, a focus on efficiency improvement; adequate subsidy and operational funding support (if any) from state governments remain crucial, for a sustainable improvement in the financial profile of the discoms,” Kadam added.