Tamil Nadu will join the Central government’s power utility turnaround scheme Ujwal Discom Assurance Yojana (UDAY) on Monday, after months of reluctance, becoming the 21st state to bail out state-owned distribution firms struggling with mountains of debt.
Tamil Nadu’s signing up for UDAY comes after some of the utilities showed signs of turnaround with the help of steps meant to cut power theft and improve efficiency.
Former Tamil Nadu chief minister J. Jayalalithaa had firmly opposed the UDAY scheme and some progress was made when Union minister of state for power Piyush Goyal met her at the secretariat on 15 July. Goyal had then stressed that the state will save at least Rs22,400 crore of discoms’ debt in the next three years.
According to data from the Central government, the Tamil Nadu Generation and Distribution Corp. (TANGEDCO) has an outstanding debt of about Rs75,700 crore as on September 2015. Out of this, 75% of the debt belonging to distribution business alone will be taken over by the state as the turnaround scheme does not cover power generation business.
Tamil Nadu has time till end of March 2017 to take over the debt, which will not be counted for the state’s borrowing limit of 3% of gross state domestic product. Unlike in many other states, Tamil Nadu has not separated power generation and distribution activities into different corporate entities.
Jayalalithaa had earlier requested Prime Minister Narendra Modi to consider certain requests of the state government and “ensure that the State finances are not adversely affected, while taking over the debt of TANGEDCO”.
Haryana’s Dakshin Haryana Bijli Vitaran Nigam Ltd was the first power utility to turn around under UDAY. It reported a profit of Rs201 crore in the first half of 2016-17 from a loss of Rs479 crore in the full financial year 2015-16, a power ministry analysis of utilities’ health showed last month.
Assam and Telangana had joined the scheme on 4 January. The other states that are still not part of UDAY are Sikkim, Karnataka, Kerala, West Bengal and Odisha.
Erratic electricity supply became the rallying point during the 2011 election campaign and toppled the Dravida Munnetra Kazhagam’s (DMK) to make way for the All India Anna Dravida Munnetra Kazhagam (AIADMK). Even during the 2014 general assembly election, it was top on the agenda.
Recently, in the run-up for the 2016 assembly election, the AIADMK promised up to 100 units of free electricity. The scheme has been implemented since the party came into power for the second consecutive term in May last year.
In Tamil Nadu, where consecutive governments have projected electricity as a welfare scheme through highly-subsidised electricity tariffs, the state has been wary of the Centre’s interference and has seen it as a threat to its federal framework.
The same applies for other Central government schemes like good and services tax (GST), National Food Security Act (NFSA) and National Eligibility cum Entrance Test (NEET).
While the state has strongly opposed these schemes, critics have claimed that the state compromised its stand after Jayalalithaa’s hospitalisation on 22 September. The 68- year-old died on 5 December.
“Apart from GST, the chief minister also opposed UDAY, as the tariff will have to be revised every three months, and NEET, as it will hit rural students. She had opposed the Food Safety Modernisation Act too. But when the chief minister is in hospital, the government has approved all the proposals by surrendering itself to the Centre,” said DMK leader M.K. Stalin on 8 November. Jamie Oleksiak Womens JerseyShare This