Central government has offered a bailout plan for state government owned electricity distribution companies known as DISCOMs. Currently, state electricity boards (SEBs) are sitting on a debt of INR 4.30 trillion and a loss of 3.8 trillion. SEBs are on the brink of financial collapse and capacity of power plants can also be severely damaged due to financial constraints. The majority of the debt is held by 8 states including Andhra Pradesh, Jharkhand and Utter Pradesh. As part of this Ujwal Scheme, states will have to take over 75% of the debt of the DISCOMs.
Uday Scheme is optional for states
States accepting this scheme will get priority funding through Upadhyaya Gram Jyoti Yojana (DDUGJY), Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or other such schemes of Ministry of Power and Ministry of New and Renewable Energy. Accepting states will also have support of additional coal at notified prices subject to availability and low cost from Ministry of Power and Ministry of Renewal Energy.
It is not the first time central government is offering bailout package to state electricity boards.
This is not a first bailout package for the SEBs, this is third in last thirteen years. Last two attempts failed to motivate the states to act. And given that it is not binding on states, the speculation will be high again on negative output of this scheme.
However, banks and industry experts are quite optimistic about this new plan and they considered it as most well-structured plan between the last two attempts and the current bailout plan.