The Tamil Nadu Generation and Distribution Corporation (Tangedco) will issue bonds worth ₹7,605 crore under the Ujwal DISCOM Assurance Yojana (UDAY) Scheme.
Tamil Nadu joined the Centre’s scheme at the beginning of last year. The scheme is aimed at reviving State discoms and help them improve efficiency.
As per the scheme, the State government has to take over 75% of discom debt and the discom has to float bonds for the remaining amount. At the time of joining the scheme, Tangedco had a debt of ₹30,420 crore. The State government had raised ₹22,815 crore last year (75% of the debt) and transferred it to Tangedco. The amount was used to repay the loans. As a result, Tamil Nadu’s fiscal deficit stood at 4.58% of the Gross State Domestic Product (GSDP) in fiscal 2016-17, breaching the Fiscal Responsibility Budget Management (FRBM) Act norm of 3% of GSDP.
Tangedco is now planning to float bonds for ₹7,605 crore on a private placement basis, which is the remaining 25% of loans to be paid under the UDAY scheme.
Tangedco has now called for bids from credit rating agencies for issuing ratings on the bonds which are guaranteed by the government of Tamil Nadu. Tamil Nadu would have a savings of about ₹950 crore in annual interest cost through reduction of debt and through reduced interest rates on the balance debt, the Union Power Ministry said during the signing of agreement.
Losses cut
According to policy note of Tamil Nadu’s Energy Department, Tangedco is expected to break even during the year 2017-18. Its losses reduced to ₹3,783 crores in 2016-17 from ₹13,985 crores in 2013-14.
The financial losses of States participating in the UDAY scheme have reduced from ₹51,589.51 crore in 2015-16 to ₹34,826.87 crore in 2016-17, R.K.Singh, Power Minister, had informed the Lok Sabha during the winter session.
