The rating agency Crisil has welcomed Union Power Ministry’s UDAY (Ujjwal Discom Assurance Yojna), which is a financial restructuring package for eight State Government-owned electricity distribution companies.
Years of losses, subsidies and low tariffs have financially crippled the companies.
Crisil believes that by fiscal 2018, UDAY can potentially reduce the power companies’ losses by 50 per cent. The conversion of distribution companies’ loans into bonds would lead to capital savings of Rs 12,000 crore. However by 2017, it will lead to 8 per cent reduction in profits of public sector banks.
The eight companies have an estimated gap (average revenue realised minus average cost of supply) of Rs 1.40 per unit. UDAY could potentially narrow this to around 70 paise by the end of fiscal 2018, Crisil said in a media statement.