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Discom debt to return to pre-UDAY levels
Why is it in the news
- As per the note from CRISIL, the external debt of state-owned electricity distribution companies (discoms) is set to increase to pre-UDAY levels of ₹2.6 lakh crore by the end of this fiscal.
- Crisil’s report is based on an analysis of discoms in 15 states that account for 85% of the aggregate losses.
More in the news
- UDAY or Ujwal Discom Assurance Yojana, which was approved by the Union Cabinet in November 2015, sought to financially stabilize discoms by allowing them to convert their debt into state government bonds, subject to certain conditions.
- As per the memoranda of understanding that states had signed under UDAY in 2015-16, their discoms were to initiate structural reforms by reducing AT&C losses by 900 basis points (bps) to about 15% in 2018-19, and also implement regular tariff hikes of 5-6% per annum.
- In lieu, state governments took over three-fourths of discom debts, thus reducing the interest burden.
- However, Crisil’s report found that while discoms enjoyed the benefit of debt reduction, structural reforms have been slow to come by.
Source
The Hindu.