New Delhi: The Union government, that of Bihar and the power distribution companies (discoms) of that State (North Bihar Power Distribution Company Limited, and South Bihar Power Distribution Company Limited) signed a Memorandum of Understanding (MoU) under the Scheme UDAY (Ujwal Discom Assurance Yojana) here today for operational and financial turnaround of the discoms. The signing ceremony was held in the august presence of Minister of State for Power Piyush Goyal.
The MoU was signed on behalf of Ministry of Power by AK Verma, Pratyaya Amrit, Secretary Energy on behalf of State government of Bihar and on behalf of the two discoms by R Lakshmanan, MD, North Bihar Power Distribution Company Limited and Sandeep Kumar MD, South Bihar Power Distribution Company Limited.
Reiterating his commitment of fulfilling all the assurances made in Bihar Package, Goyal said:
“The government stands committed to all the assurances that were made in terms of Bihar package which included an Ultra Mega Power Projects (UMPP) at Banka for which now a coal mine has also been allotted and cheaper coal given to Barh so that the cost of power reduced nearly by Rs 2 a unit which includes quickly implementing Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) scheme and Integrated Power Development Scheme so that power can reach every home in Bihar. Goyal further informed that 981 Mega Watt of power from Bhutan has been allotted to Bihar and from Buxar Thermal Power Plant, 1310 Mega Watt of Power will be given to Bihar.”
The distribution utilities of the country are reeling under heavy debt burden. As on 30 September 2015, the outstanding debt of the discoms stood at Rs 4.3 lakh crore. In order to bring relief to these Utilities from the burden of debt, and to improve their overall performance, government of India launched the Scheme UDAY on 20 November 2015, after a series of discussions with all the stakeholders, namely the State governments, discoms, lenders etc. UDAY is an aim to ensure a permanent solution to the debt-ridden distribution utilities to achieve financial stability and to improve their operational efficiencies, for sustained growth.
Bihar is the sixth State to have accepted UDAY for bringing about a positive change in the Power Sector scenario of the States. Rajasthan, Uttar Pradesh, Chhattisgarh and Jharkhand have already signed the MoU under UDAY for operational and financial turnaround of discoms. With the signing of MoU with Bihar, approximately 33% of the discom debt — around Rs 1.40 lakh crore — will get restructured. Gujarat has signed the MoU for operational turnaround, too, considering the healthy financial position of the discoms of the State.
Bihar has taken a major step towards improving the financial health of the discoms by signing the MOU under UDAY and agreeing to take over the debt of the discoms. The government of Bihar will take over Rs 2,332 crore of discom debt, being 75% of the total discom debt of Rs 3,110 crore outstanding as on 30 September 2015, as envisaged in the scheme. The scheme also provides for the balance debt of Rs 778 crore to be re-priced or issued as State guaranteed discom bonds, at coupon rates around 3% less than the average existing interest rate. The annual saving in the interest cost to the State will be around Rs 117 crore on account of restructuring of the discom debt.
UDAY not only focusses on bringing about financial turnaround of the discoms. It also lays stress on improving operational efficiencies of the discoms. In order to bring about a sustainable turnaround of the discoms, the State of Bihar and the discoms will improve operational efficiency through compulsory feeder and distribution transformer metering, consumer indexing & GIS mapping of losses, upgrade or change transformers, meters etc, smart metering of high-end consumers, thereby bringing about reduction in transmission losses and AT&C losses, besides eliminating the gap between cost of supply of power and realisation. The reduction in AT&C losses and transmission losses to 15% and 4% respectively is likely to bring an additional revenue of around Rs 6,650 crore during the period of turnaround.
With the financial turnaround through financial and operational efficiencies, the rating of the discoms will improve, which will help them in raising cheaper funds for their future capital investment requirement. This is expected to provide interest cost saving of around Rs 80 crore to the discoms.
While efforts will be made by the State government and the discoms to improve the operational efficiency of the discoms, and thereby reduce the cost of supply of power, the central government will also provide incentives to the discoms and the State government for improving Power infrastructure in the State and for further lowering the cost of power. The Central schemes such as DDUGJY, IPDS, Power Sector Development Fund or such other schemes of MOP and MNRE are already providing funds for improving the power infrastructure in the State and additional or priority funding will be considered under these schemes, if the State or discoms meet the operational milestones outlined in the scheme. The State shall also be supported through additional coal at notified prices and in case of availability through higher capacity utilization, low cost power from NTPC and other CPSUs. Other benefits such as coal swapping, coal rationalization, correction in coal grade slippage, availability of 100% washed coal will help the state to further reduce the cost of Power. The State will gain around Rs 1,086 crore due to these coal reforms.
Demand Side interventions in UDAY such as usage of energy-efficient LED bulbs, agricultural pumps, fans & air-conditioners and efficient industrial equipment through PAT (Perform, Achieve, Trade) will help in reducing peak load, flatten load curve and thus help in reducing energy consumption in the State of Bihar. The gain is expected to be around Rs 720 crore.
The ultimate benefit of signing the MoU will go to the people of Bihar. Higher demand for power from discoms will mean higher PLF of generating units and, thus, lower cost per unit of electricity thereby benefitting consumers. The discoms will also increase power supply in areas with reduced AT&C losses. The scheme will allow speedy availability of power to around 1,152 villages and 160.60 lakh households in Bihar that are still without electricity. Availability of 24×7 power to hitherto unconnected villages or households etc. will boost the economy, promote industries, thereby improving employment opportunities and see Bihar develop into one of the leading industrialised States in India.
An overall net benefit of approximately Rs 9,000 crore will accrue to the State by opting to participate in UDAY, by way of savings in interest cost, reduction in AT&C and transmission losses, interventions in energy efficiency, coal reforms etc. during the period of turnaround.
UDAY is an effort to make the discoms financially independent and operationally healthy, to be able to supply adequate power at affordable rates, through 100% Village electrification and 24×7 power for all.