UDAY may provide Rs 80,000 cr relief to struggling discoms

The state-run Ujwal Discom Assurance Yojna (UDAY) is likely to provide a relief to struggling state-owned discoms to the extent of Rs 80,000 crore per year till FY19, says an ICRA survey.
The aggregate relief of Rs 80,000 crore per year by FY19 would translate into a reduction in losses by around Rs 0.95 per unit on an all India basis, it said.
This in turn should enable the distribution utilities to break-even over the next 3-4 year period.
Ratings agency Crisil also believes the scheme can potentially halve the discom losses of eight states that had participated in the financial restructuring package (FRP) by fiscal 2018.

The conversion of discom loans into bonds would lead to capital savings of Rs 12,000 crore for public sector banks.
However, it will shave eight per cent of the profit of these PSBs in FY17, Crisil said.

Under the bailout plan, the state governments will have to take over 75 per cent of the discoms' debt and additionally these loans will not be included while calculating the state's fiscal deficit till 2016-17.
The all-India losses of discoms are estimated at around Rs 62,000 crore for March 31, which were mainly due to poor operational inefficiencies because of high AT&C losses, tariff hikes of the past not being reflective of cost and huge interest burden because losses were being funded by debt.

This had necessitated bailouts by the central government in past.
Crisil said if the scheme is implemented for the 8 FRP states, it has the potential to wipe out losses of discoms in Haryana, Andhra Pradesh and Telangana by FY18.
For discoms in Tamil Nadu, Rajasthan, Uttar Pradesh, Bihar and Jharkhand, losses will reduce but total elimination can happen only by achieving milestones on operational efficiencies lest they regress into the debt trap, it said.