| New Delhi

Tamil Nadu joins UDAY, to save Rs.11,000 crore

Tamil Nadu joins UDAY, to save Rs.11,000 crore
UDAY has now covered almost 90% of total utilities’ debt of around Rs.4 trillion.

Tamil Nadu on Monday joined the Ujwal DISCOM Assurance Yojana (UDAY) scheme, meant for revival of debt stressed discoms, which would help the state save around Rs.11,000 crore during the 3-year turnaround period.

The southern Indian state also became the 21st State to join the scheme, and its discom—TANGEDCO—on Monday inked a memorandum of understanding (MoU) with power ministry for operational and financial turnaround of the utility.

With the addition of Tamil Nadu, UDAY has now covered almost 90% of total utilities’ debt of around Rs.4 trillion.

Power minister Piyush Goyal presided over the function to ink MoU with the State and its discom TANGEDCO. The signing ceremony was held in the presence of Tamil Nadu Electricity, Prohibition and Excise minister P. Thangamani.

Tamil Nadu would derive an overall net benefit of about Rs.11,000 crore through UDAY, by way of savings in interest cost, reduction in AT&C and transmission losses, interventions in energy efficiency, coal reforms, among others, a power ministry statement said.

By signing the MoU under UDAY, the State is taking over 75% of debt of Rs.30,420 crore of TANGEDCO. The scheme also provides for the balance debt to be re-priced or issued as state guaranteed discom bonds, at coupon rates around 3-4% less than the average existing interest rate.

The state would have savings of about Rs.950 crore in annual interest cost through reduction of debt and through reduced interest rates on the balance debt.

Tamil Nadu and TANGEDCO have committed to bring about operational efficiency. The reduction in AT&C losses and transmission losses to 13.5% and 3.7% respectively, is likely to bring additional revenue of around Rs.1,601 crore to TANGEDCO.

Demand side interventions in UDAY, such as usage of energy-efficient LED bulbs, would help in reducing peak load, flatten load curve and help in reducing energy consumption in Tamil Nadu. The gain is expected to be around Rs.2,304 crore.

The Centre would also provide incentives to the State and the discom for improving power infrastructure and lowering the cost of power.

The state would get additional/priority funding through the central schemes such as Deen Dayal Upadhyay Gram Jyoti Yojana, Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or similar schemes of the ministries of power and new and renewable energy, if they meet the operational milestones outlined in the scheme.

Tamil Nadu will also be supported through additional coal at notified prices and in case of availability through higher capacity utilisation, low cost power from NTPC Ltd and other CPSUs. Other benefits such as coal swapping, coal rationalisation, correction in coal grade slippage, availability of 100% washed coal would help the State to further reduce the cost of power.

The state would gain around Rs.4,320 crore due to these coal reforms.

The turnaround, to be implemented via financial and operational efficiencies, is expected to improve TANGEDCO’s rating, which would in turn help in raising cheaper funds for future capital investment requirement. This is expected to provide interest cost saving of around Rs.60 crore for TANGEDCO in 3 years.

The ultimate benefit of signing the MoU would go to the people of Tamil Nadu. Higher demand for power from DISCOMs would mean higher plant load factor (PLF) of generating units and therefore, lesser cost per unit of electricity thereby benefitting consumers.

Availability of 24×7 power for all would increase the economic activity and improve employment opportunities in the state.

UDAY was launched by the Centre on 20 November 2015 as a sustainable solution for the debt-ridden distribution utilities.


Liked the story? Subscribe to our daily and weekly newsletter, InfraReads, to keep track of India's infrastructure space.