Free Press Journal

UDAY has increased states’ fiscal deficit


It shot up 0.7 per cent despite launch of this central scheme 

New Delhi : Central government scheme UDAY for revival of debt-stressed discoms is not a panacea and bonds issued under this has increased states’ gross fiscal deficit by 0.7 percentage points, according to the Economic Survey. However, the Survey, which was tabled in Parliament last week, noted that the scheme has significantly addressed structural issues of the power sector but stated the need to increase electricity tariff to reduce losses.

Ujwal DISCOM Assurance Yojana (UDAY) envisages reduction in interest burden, cost of power and Aggregate Technical and Commercial (AT&C) losses. It was launched in November 2015. “UDAY is not a panacea for addressing fiscal situations though it has had a significant impact on addressing the structural issues attached with the power sector,” the Economic Survey stated. “Under the UDAY scheme, states were allowed to issue non-SLR state development (SDL) bonds in the market or directly to banks or financial institutions holding the discom debt. “Due to these bonds, the state Gross Fiscal Deficit GFD/GDP ratio got increased by 0.7 percentage points to 3.6 per cent in 2015-16 from 2.9 per cent without UDAY,” it noted.

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