Current success of the Ujwal DISCOM Assurance Yojana (UDAY) really marks the beginning of a better and energy rich future for the nation. In the previous blog, we have given you a brief idea on the transformations needed for a better power transmission throughout India. In the same breath, we need to highlight the recent win of Government of India in improving the health of the power distribution companies (DISCOMs).
Ujwal DISCOM Assurance Yojana (UDAY) scheme was launched by the Ministry of Power nearly 18 months ago, focusing on bringing financial and operational reform to help DISCOMs work better. The scheme has initiated reform in twenty-six states and union territories, creating drastic positive developments in states like Uttar Pradesh, Rajasthan, Tamil Nadu, and Haryana, that were suffering from worst possible scenarios in power transmission system. Continued growth of solar in India had made it pertinent to go for a better energy transmission system, which the country clearly lacks. In such a situation, UDAY has successfully aided in restoring the financial status of DISCOMs largely. Uday’s objective was to transfer the long-standing debt of the DISCOMs to the state Governments. And after 18 months, the scheme bore fruit by transferring 75% of DISCOM debt to the state governments, while reducing the interest burden as well.
Closer Inspection of the Financial Reform
In 2015, DISCOMs were carrying a huge debt of INR 4.3 trillion (USD 65 billion). The annual losses also amounted to INR 600 billion (USD 9 billion), which created a major hurdle in making ‘power for all’ a reality. Out of the said enormous amount, INR 3.8 trillion was attributed to states under the UDAY scheme (26 states and union territories). Realising that carrying that much burden will slow down the green energy shift and progress of illuminating 100 per cent of India, UDAY helped transfer near about 61% of the debt to state governments. Another 10 per cent of the debt is expected to be restructured eventually. Calculations show, that these initiatives will help states to reduce the interest cost by INR 160 billion. Besides giving DISCOMs a breathing space by reducing debt, UDAY is also meant to isolate State Governments from controlling power pricing and critical DISCOM operations. This will certainly help DISCOMs to restructure their operations and start afresh focusing on an efficient transmission facility development around the country.
However, in operation, Uday’s success is still not at par with the pace of energy transition push in the country. For example, although, AT&C losses have reduced to 22.5% in FY2016, from 24.0%, to reach the 15% goal by FY2019, more efforts are required. In order to become an energy rich country, and offer ‘power for all’, India has to re-structure its goals and improve the performance of operational parameters.
Linking various central Government funding programs with UDAY for a successful result was also a decisive decision made by the Indian Government. It will certainly reduce the offtake risk for power generators and encourage more states to join in and already members to stay on course of development. With a better transmission system, India can venture ahead in speeding up the solar installation process within the country, generating and providing power to all.
All in all, UDAY scheme is on its way to improve the energy infrastructure of India. However, careful scheme monitoring is needed in order to ensure continued progress of the development cycle.