Odisha wants UDAY scheme to be implemented through its power trading firm

Aimed at financial turnaround of the discoms saddled with debt and operational losses

Having given its consent to join the central government's UDAY (Ujjwal Discom Assurance Yojana), Odisha has called for implementation of the scheme through its bulk power purchaser - Gridco (formerly Grid Corporation of Odisha).

As of now, Gridco is ineligible under the UDAY scheme aimed at financial turnaround of the distribution companies (discoms) saddled with debt and operational losses.

"Gridco is neither a discom nor a holding company and hence is not eligible to execute the UDAY scheme. We have requested the Government of India to allow Gridco to implement the scheme. Since, Gridco is managing three discoms previously controlled by Reliance Infra", said a senior government official.

The Odisha government through Gridco, owns 49 per cent stake in the four discoms -- Central Electricity Supply Utility of Odisha Ltd (Cesu), North Eastern Electricity Supply Company of Odisha Ltd (Nesco), Western Electricity Supply Company of Odisha Ltd (Wesco) and Southern Electricity Supply Company of Odisha Ltd (Southco). Gridco has been entrusted with the management of Nesco, Wesco and Southco after the state power regulator Odisha Electricity Regulatory Commission (OERC) scrapped their licenses over unsatisfactory performance and failure to contain steep AT&C (aggregate technical & commercial) losses.

The state government has demanded that loans of Gridco be converted into bonds instead of the loans of discoms. By the end of March 2015, the cumulative debt of the four discoms totaled to Rs 6,096 crore. Gridco itself is under a debt burden of Rs 5,500 crore by the end of March last year. disha has projected a higher fiscal deficit of 3.79 per cent for this financial year after factoring in the UDAY scheme for which it has a provision of Rs 1,196 crore.

Due to legacy issues, the discoms across the country are trapped in a vicious cycle with operational losses being funded by debt. The 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 15 per cent.

UDAY assures the rise of vibrant and efficient discoms through a permanent resolution of past as well as potential future issues of the sector. It empowers discoms with the opportunity to break even in the next two to three years. This can be achieved through four initiatives -- improving operational efficiencies of discoms, reduction of cost of power, reduction in interest cost of discoms and enforcing fiscal discipline on discoms through alignment with state finances.

The Union Cabinet recently extended the deadline for implementing the UDAY scheme by a year to March 31, 2017.