In November 2015, amid much fanfare, the then Union power minister Piyush Goyal launched the Ujwal DISCOM Assurance Yojana or UDAY, as the central government set itself on the path of ridding state electricity distribution companies (DISCOMs) of the monumental debts they had accumulated through years of mismanagement.

As of September that year, the total accumulated debt of the loss-making state DISCOMs stood at a massive $74 billion or Rs 4.8 trillion, with the companies borrowing heavily from banks at exorbitant interest rates to keep going.

The scheme initiated by the central government envisioned four steps to be taken to help the state utilities start breaking even in a span of two to three years.

1. Improving operational efficiencies of DISCOMs

2. Reduction of cost of power

3. Reduction in interest cost of DISCOMs

4. Enforcing financial discipline on DISCOMs through alignment with state finances

Years of mismanagement had left the DISCOMs grappling with high interest rates of up to 14-15 per cent on their accumulated debts, leading to a reduced power purchasing capacity for the DISCOMs even as the country had begun generating more power than was the demand. Raising power tariffs was not an option for the DISCOMs due to political reasons in most of the states.

Consumers thus had to face black-outs not because the country couldn’t produce enough power but because the DISCOMs couldn’t buy the electricity produced due to legacy issues that ailed them.

As part of the scheme, when a DISCOM would opt into it, the respective state government was expected to take over 75 per cent of the debt through two years, reducing the interest rate charged on the loan between 8 per cent and 9 per cent from the earlier 14-15 per cent. The governments can then issue ‘UDAY’ bonds to raise the money to be paid to the banks.

As of now, 27 states and five union territories have opted into the scheme with some state DISCOMs yet to begin implementation of the scheme.

Data has been collected from the central government’s UDAY portal.

Here we take a look at the status of bonds issued by the states under the scheme as part of debt restructuring.