6.11.15

Uday

The Cabinet has cleared an ambitious $7 billion debt-recast and reform package to revive loss-making state utilities, which have choked the power sector by imposing blackouts on customers and refusing to buy surplus electricity from power stations because of mismanagement, power theft and heavy losses.
States have been given strong incentives such as cheaper power and more coal if they adopt the scheme and take over 75% of the debt of ailing distribution companies (discoms), half of it in the current fiscal year and 25% next year. In these two years, the debt will not be added in calculating their fiscal deficit, the government said.States will issue bonds in the market or to the lenders, while the debt that is not taken over by the state will be converted into loans or bonds with interest rate not more than bank's base rate plus 0.1%, it said.
Analysts and private power producers said revival of discoms depended on regular tariff revision by regulators, but Power, Coal and Renewable Energy Minister Piyush Goyal rubbished this view and said consumers should not be asked to pay for inefficiency. “I congratulate the Indian (electricity) regulators that they have not allowed the distribution companies to burden the consumers with inefficiencies. I would like to clarify that the regulators have always been wrongly blamed ... The regulators have done the right job by not letting the distribution companies pass on high AT&C (transmission and commercial) losses and high interest rates to the consumers,“ he said.
The success of the discoms' package, called Ujwal Discom Assurance Yojna (Uday), is critical for India's ambitious clean energy programme to combat cli mate change, revival of stranded thermal projects, the health of banks that have lent Rs.4.3 lakh crore to discoms and Prime Minister Narendra Modi's vision to supply affordable 24x7 power to all. The package follows Goyal's initiatives to significantly increase coal output, provide fuel to stranded plants and increase the use of energy-efficient lights ­ measure that would fall flat if discoms are not revived.
“The weakest link in the value chain is distribution ... Financially stressed discoms are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development. Efforts towards 100% village electrification, 24X7 power supply and clean energy cannot be achieved without performing discoms. Power outages also adversely affect national priorities like `Make in India' and `Digital India',“ a government statement said.
To encourage states to take the road to reforms, the Centre will give them additional funding on a priority basis through schemes such as the Deen Dayal Upadhyaya Gram Jyoti Yojna and Integrated Power Sector Development Fund.They will also get additional coal at notified prices and if possible cheaper power from state firms.

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