Ujjwal GoyalNPTI-14th Batch

Date- 10/05/2016

Earlier Scheme

Financial Restructuring Plan (FRP) 2012 :-

Announced on-5th Oct, 2012 By Central (UPA) GovernmentReason- For Achieving Financial turnaround by Restructuring discoms debt with transitional Finance Mechanism

Features- States to take over 50% of short term liabilities through issuance of non-SLR bond and balance 50% need to be restructured by the banks with a 3 year period duly guaranteed by state governments.

Failure of FRP-2012

• No clarity was there on the interest rate at which the bonds will be issued by SEBs.

•Losses were hidden in “Other Current Assets” on which there was no clarity with DISCOMs like Rajasthan, Uttar Pradesh and Andra Pradesh(undivided).

FinancialRestructuringPlan Failure

UDAY : At a Glance

UDAY is the integrated approach of the Ministry of Power (MoP), Ministry of Coal (MoC) and Ministry of New & Renewable Energy (MNRE).

Ujwal DISCOM Assurance Yojana” is regarded as one stop medicine to all woes of the power distribution companies in India

Launched on 09th November 2015 and till now 15 out of 29 states has adopted the scheme for strengthening the financial health of DISCOMs.

According to MoP, the overall losses of all the State Discoms are INR 4.3 Lakh Crores.

UDAYAdopted StatesAP

Bihar

Haryana

Gujarat

MP

Chhattisgarh

Punjab

UP

HP

Jharkhand

Orissa

Maharashtra

Uttarakhand

J & K

Rajasthan

POWER SECTOR REFORMS

From 1956-1991•Electricity Act 1948•Industrial Policy Resolution(1956)•Generation & Distributionof Power under State Ownership

From 1991-2014•Legislative and PolicyInitiatives(1991)•Generation sector Private•Establishing CERC and SERCs (Regulatory Act-1998)•Electricity Act(2003)•APDRP/ R-APDRP/ RGGVY

From 2014- Onwards •Highest Power generation and Transmission capacity addition• Implementation of IPDS and DDUGJY•Biggest LED lighting movement in the World•Launch of UDAY

Dark Era

1956–1991Pre-

liberalizationEra

1991-2014Post-

liberalization Era

2014 onwards

Accelerated Growth

Trajectory

UDAY

Objectives of UDAY Scheme

Reduction in Cost of Interest

of Discoms through debt takeover by

States

Dramatically Improving

Operational Efficiency of

Discoms

Reducing the Cost of Power Procurement

Enforcing Financial

Discipline on Discoms

Benefits ofUDAY

To Govern

ment

• Achievement of 24X7 Power for All

• Energy security through Coal and Renewables

Industry &

Consumers

• Availability of 24X7 power improving quality of life and efficiency

• Lower cost of power

Banks & Investor

s

• Lower risk for existing investments and loans in power, coal and renewables sector

• Reduce investment uncertainty across the sector

Benefits of UDAY

1. 75% of the Discoms debt taken over by the respective states in a phased manner of 50% in FY’ 2015-16 and remaining 25% in FY’2016-17

2. Government of India will not include the debt taken over by the States as per the above scheme in the calculation of fiscal deficit of respective States in the financial years 2015-16 and 2016-17

3. States will issue non-SLR including SDL bonds in the market or directly to the respective banks / Financial Institutions (FIs) holding the DISCOM debt to the appropriate extent.

4. DISCOM debt not taken over by the State shall be converted by the Banks / FIs into loans or bonds with interest rate not more than the bank’s base rate plus 0.1%. Alternately, this debt may be fully or partly issued by the DISCOM as State guaranteed DISCOM bonds at the prevailing market rates which shall be equal to or less than bank base rate plus 0.1%.

5. State DISCOMs will comply with the Renewable Purchase Obligation (RPO) outstanding since 1st April, 2012, within a period to be decided in consultation with Ministry of Power.

6. States accepting UDAY will be given additional funding through

DDUGJY, IPDS, Power Sector Development Fund (PSDF) or other such

schemes