Jhark­hand’s de­fault raises ques­tions over UDAY im­pact

STATE HAS STOPPED PAY­ING FOR PUR­CHASE OF 700 MW A DAY, PIL­ING UP RS. 1,300 CR IN DUES

Resource Digest - - CONTENTS -

When it was launched in Novem­ber 2015, the Ujwal Dis­com As­sur­ance Yo­jana (UDAY) was touted as a scheme that would nurse State-owned power dis­tri­bu­tion com­pa­nies back to health. Now, how­ever, doubts are ris­ing about whether States are us­ing the scheme as an­other win­dow to pile up fresh debt.

Jhark­hand, the first state to sign up for the UDAY scheme, is a case in point. On De­cem­ber 6, 2015, Union Power Min­is­ter Piyush Goyal thanked the Bjp-ruled State for tak­ing the lead, tweet­ing: “24x7 power is not far.”

The State raised a loan and cleared his­toric dues of Rs. 5,553 crore, ac­cu­mu­lated be­tween 2001 and Septem­ber 2015 — pay­ing Rs. 4,770 crore to statu­tory gen­er­a­tion util­ity Damodar Val­ley Cor­po­ra­tion (DVC) and Rs. 783 crore to Coal In­dia.

A year later, how­ever, Jhark­hand has piled up Rs. 1,300 crore in fresh dues to DVC and Rs. 32 crore to Coal In­dia. It has sim­ply stopped pay­ing dues to DVC for the pur­chase of roughly 700 MW a day. Re­peated ef­forts to seek clar­i­fi­ca­tions from Jhark­hand Chief Sec­re­tary Raj Bala Verma and Ad­di­tional Chief Sec­re­tary, En­ergy, RK Sri­vas­tava were un­suc­cess­ful.

SAME OLD STORY

UDAY is the third debt-re­struc­tur­ing pro­gramme in­tro­duced to help dis­coms. The first was in 2001 and an­other one fol­lowed in 2012.

While launch­ing UDAY, the Cen­tre had said that dis­coms were trapped in a vi­cious cy­cle, with op­er­a­tional losses be­ing funded by debt. “Out­stand­ing debt of Dis­coms has in­creased from about Rs. 2.4 lakh crore in 2011-12 to about Rs. 4.3 lakh crore in 2014-15, with in­ter­est rates up to 14-15 per cent,” it had said in a Novem­ber 2015 re­lease.

The Cen­tral gov­ern­ment had claimed that UDAY would be a “per­ma­nent res­o­lu­tion of past as well as po­ten­tial fu­ture is­sues of the sec­tor.” So far, 90 per cent of the States have joined the scheme, the last be­ing Tamil Nadu, a State that had an ag­gre­gate debt of Rs. 75,000 crore.

Un­der UDAY, State gov­ern­ments and their dis­coms en­tered into a tri­par­tite agree­ment with the Union Power Min­istry to turn around dis­coms.

The States would com­mit to re­duce ag­gre­gate tech­ni­cal and com­mer­cial losses. Dis­coms would be al­lowed to re­vise tar­iffs quar­terly to off­set fuel price in­creases, if any.

State gov­ern­ments would take over 75 per cent of the to­tal out­stand­ing dis­com debt as on Septem­ber 30, 2015 by the end of fis­cal year 2017 and is­sue bonds. Dis­coms would use the funds raised through these bonds to dis­charge three-fourths of their out­stand­ing debt.

Sec­tor ex­perts con­firm that UDAY will im­prove the af­ford­abil­ity of dis­coms in the short and medium term. How­ever, they are ap­pre­hen­sive if this will bring any long-term so­lu­tion as States have al­ways found a way to pile up dues.

“In­creas­ing ef­fi­ciency of dis­coms is a purely man­age­ment is­sue. I don’t see any struc­tural re­form in UDAY that will make dis­coms more ef­fi­cient in the long term,” a se­nior ex­ec­u­tive at a prom­i­nent pri­vate util­ity said.

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