The governments of 16 states have taken over around Rs 2.08-lakh crore debt of electricity distribution companies (discoms) as per the terms of the Ujwal Discom Assurance Yojana (Uday). This helped in lowering of interest rates to 7-8.5 per cent from around 11-12 per cent, resulting in Discoms saving Rs 11,989 crore till December 2016.
Experts believe that though such measures are helping discoms turn around, it is putting palpable financial pressure on the states. Analysts believe that these developments would contribute in raising the fiscal deficit of the states.
SBI Ecowrap, a research note published by the SBI Corporate Centre, said the impact of farm loan waiver and Uday will push the states’ fiscal deficit upwards, making it an uphill task for them to adhere to the 3 per cent limit set by the FRBM Committee. “We estimate that out of 29 states, after the implementation of loan waiver and Uday. only eight states will have less than 2.5 per cent fiscal deficit,” SBI Ecowrap noted.
Under Uday, state governments are required to take over 75 per cent of short-term liabilities of their respective discoms (as in September-end 2015), 50 per cent in the first year (FY16) and the balance in FY17. FE