By signing the Uday agreement, the state government agreed to take over 75 per cent debt of Rs 30,420 crore of its distribution company Tangedco, a Union Power Ministry statement said.

"The scheme provides for the balance debt to be re-priced or issues as state guaranteed discom bonds at coupon rates around 3-4 per cent less than the average existing interest rate," it added.

The state would have savings of about Rs 950 crore in annual interest costs.

The reduction in aggregate technical and commercial losses (AT&C) to 13.5 per cent and transmission losses to 3.7 per cent is likely to bring additional revenue of Rs 1,601 crore to Tangedco, the statement said.

Besides, the state will gain around Rs 4,320 crore from coal swapping, rationalisation, coal washing and correction in grade slippages, it added.

Tamil Nadu, whose cabinet approved joining Uday on January 4, had earlier been reluctant to join, because the schme makes it mandatory for states to revise power tariffs every quarter.