ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Will UDAY Brighten Up Rajasthan’s Finances?

The Ujwal DISCOM Assurance Yojana required state governments to take over the debt of power distribution companies in their book of accounts. Though this one-time intervention made both debt and deficit measures more comprehensive, it has raised many challenges that include comparability of deficit across states and long-term fiscal implications of the power sector debt on state finances.

Fiscal prudence in most countries, including India, is focused on general government deficit. Though there is strong merit in focusing on the public sector borrowing requirement (PSBR) to judge fiscal health, paucity of data and its timeliness always prevented having a consolidated view of public sector borrowing. In the Indian federal system also, the focus has always been in controlling fiscal deficit reflected in the state and union government budgets without much attention to PSBR. Deficit in the government budget is not a true reflection of public sector indebtedness.

However, this situation has changed significantly for some states in India with the introduction of the Ujwal DISCOM Assurance Yojana (UDAY). Under UDAY, a number of state governments have taken over the debt of power distribution companies in their books of accounts. Though this one-time intervention made both debt and deficit measures more comprehensive in many states for two years, it has raised many challenges, including comparability of deficit across states and long-term fiscal implications of power sector debt on state finances. In our view, this restructuring of power sector debt may have the following long-term fiscal implications:

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Published On : 2nd Aug, 2018

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