nd str and n rastr          t re    9.29
     permanent resolution of past as well as potential                States will issue non-SLR including SDL
     future issues of the sector. It empowers DISCOMs                 (State Development Loan) bonds in the
     with the opportunity to break even in the next 2-3               market or directly to the respective banks
     years. This is to take place through four initiatives:           and Financial Institutions (FIs).
           (i) Improving operational efficiencies;                    DISCOM debt not taken over by the
          (ii) Reduction of cost of power;                            State shall be converted by the Banks and
        (iii) Reduction in interest cost; and                         FIs into loans or bonds with interest rate
                                                                      not more than the bank’s base rate plus
         (iv) Enforcing financial discipline.
                                                                      0.1 per cent. Alternately, this debt may
           Operational efficiency to be improved via steps            be fully or partly issued by the DISCOM
     such as – compulsory smart metering, upgradation                 as State guaranteed DISCOM bonds at
     of transformers, meters, etc., energy efficiency                 the prevailing market rates which shall be
     via steps like efficient LED bulbs, agricultural                 equal to or less than bank base rate plus
     pumps, fans & air-conditioners etc.—to reduce                    0.1 per cent.
     the average AT&C loss from around 22 per cent
                                                                      States to take over the future losses of
     to 15 per cent and eliminate the gap between ARR
                                                                      DISCOMs in a graded manner.
     (Average Revenue Realised) and ACS (Average
     Cost of Supply) by 2018-19.                                      States accepting UDAY and performing
                                                                      as per operational milestones will be given
           Reduction in cost of power would be achieved
                                                                      additional / priority funding through
     through measures such as increased supply of
                                                                      Deendayal Upadhyaya Gram Jyoti
     cheaper domestic coal, coal linkage rationalisation,
                                                                      Yojana (DDUGJY),Integrated Power
     liberal coal swaps from inefficient to efficient
                                                                      Development Scheme (IPDS), Power
     plants, coal price rationalisation based on GCV
                                                                      Sector Development Fund (PSDF) or
     (Gross Calorific Value), supply of washed and                    other such schemes of Ministry of Power
     crushed coal, and faster completion of transmission              and Ministry of New and Renewable
     lines. NTPC alone is expected to save Rs. 0.35                   Energy. States not meeting operational
     unit through higher supply of domestic coal and                  milestones will be liable to forfeit their
     rationalization and swapping of coal which will be               claim on IPDS and DDUGJY grants.
     passed on to DISCOMs.
                                                                      Such States shall also be supported with
           The salient features of the scheme are as                  additional coal at notified prices and,
     given below66:                                                   in case of availability through higher
                States shall take over 75 per cent of the             capacity utilisation, low cost power from
                DISCOM debt—50 per cent in 2015–16                    NTPC and other Central PSUs.
                and 25 per cent in 2016–17. This will                 UDAY is optional for all States. However,
                reduce the interest cost to 8–9 per cent,             States are encouraged to take the benefit
                from as high as 14–15 per cent.                       at the earliest as benefits are dependent on
                GoI will not include the debt taken over              the performance. [By March 2017, most
                by the states in the calculation of fiscal            of the states/UTs had joined the scheme.]
                deficit of the States in the financial years     Basically, financial liabilities of DISCOMs
                2015–16 and 2016–17.                         are the contingent liabilities of the respective
       66.    Ministry of Finance, Economic Survey 2015–16,  States and need to be recognized as such. Debt of
              pp.        .                                   DISCOMs is de facto borrowing of States which