Power sector Current Affairs

Amitabh Kant Committee constituted to address NPAs in power sector

The Union Government has constituted high-level committee headed by NITI Aayog Chief Executive Amitabh Kant to address problem of Non-performing assets (NPAs) or stressed assets in India’s power sector. It comprises secretaries in the ministries of power, coal and department of financial services as it members. The Government is also planning to investigate whether private developers have inflated project costs to show higher debt.

Background

According to second volume of Economic Survey 2016-17 released in August 2017, NPAs in power generation accounted for around 5.9% of the banking sector’s total outstanding advances of Rs. 4.73 trillion. Tackling issues that afflict so-called stranded power assets will provide much-needed relief for Indian banks weighed down by bad loans. Besides, weak financial health of state-owned power distribution companies (discoms) is also hampering process of signing long-term power purchase agreements (PPAs) through competitive bidding.

So far, a total of 34 coal-fuelled power projects, with an estimated debt of Rs. 1.77 trillion were reviewed by government after being identified by department of financial services. Issues faced by these projects include paucity of funds, lack of PPAs and absence of fuel security.

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Nagaland, A&N Islands, Dadra & Nagar Haveli, Daman & Diu ink MoU under UDAY Scheme

Government has signed four MoUs under Ujwal DISCOM Assurance Yojana (UDAY) Scheme with Nagaland and UTs of Andaman & Nicobar Islands, Dadra & Nagar Haveli & Daman & Diu for operational improvements. With this, 27 States and 4 UTs have joined UDAY till date.

These State/UTs have joined only for operational improvement and shall not undergo financial restructuring and issue of bonds under the scheme. These MoUs will pave way for improving operational efficiency of Electricity Departments or DISCOM of these State/UTs.

Ujwal DISCOM Assurance Yojana (UDAY)

UDAY Scheme was launched by Union Power Ministry for financial turnaround and revival package for state electricity distribution companies (DISCOMs). It aimed to help to make discoms financially and operationally healthy so they can supply adequate power at affordable rates.

The scheme is optional for the states to join. Under it, state governments were to take over up to 75% of their respective discoms’ debt by issuing sovereign bonds to pay back the lenders. Remaining 25% of debt will be issued by discoms in the form of bonds.

UDAY envisages to have a permanent solution for past as well as potential future issues of power sector such as reducing interest burden ondiscoms by allowing states to take over the bulk of their debt, reduce the cost of power, increase operational efficiencies of discoms by providing capital and infrastructure like coal linkages and reduce in AT&C and transmission losses.

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