UDAY Scheme Current Affairs

Union Government gives nod for issuance of UDAY bonds to four states

The Union Finance Ministry has approved the proposal of four states for the issuance of Ujjwal Discom Assurance Yojana (UDAY) bonds.

These four states are Uttar Pradesh, Rajasthan, Jharkhand and Chattisgarh. These states account for around about 35 per cent or around 1.5 lakh crore rupees of the outstanding loans of State electricity distribution utilities in the country.

These bonds will be issued by these states as per the UDAY Scheme which allows state governments to take over 75 per cent of power distribution companies (DISCOMs) debt and pay back lenders by issuing bonds.

The scheme also provides that remaining 25 per cent of the debt to be paid back through discom-issued bonds. Total discom debt in the country amounts to Rs.4.3 lakh crore.

So far total 16 states have agreed to join UDAY Scheme and last one to join were Manipur and Tripura. Six states have signed the UDAY contract with the Union Government.


Bihar becomes sixth state to join UDAY Scheme

Bihar became the sixth state to join Union Government’s UDAY (Ujwal Discom Assurance Yojana) Scheme for financial restructuring of debt of power distribution companies.

In this regard, tripartite Memorandum of Understanding (MoU) was signed between Bihar government, State Power Distribution companies (DISCOMs) and Union Power ministry.

Note: Bihar is the 6th state after Rajasthan, Chhattisgarh, Jharkhand, Uttar Pradesh and Gujarat to become part of the scheme.  It is second Non-NDA state after Uttar Pradesh to join the scheme.

Under the scheme,

  • Bihar government would take over 75% or 2,332 crore rupees of the state DISCOM’s total debt of 3,110 crore rupees as of September 2015.
  • The balance 778 crore rupees outstanding debt will be re-priced or issued as state guaranteed DISCOM bonds at coupon rates of around 3%.
  • The debt restructuring of state DISCOMs will lead to annual saving in interest cost to the tune of around Rs 117 crore.

The financial restructuring of debt under this scheme will help Bihar to speedily provide power to around 160.60 lakh households in 1,152 villages that are still without electricity.