06:00:00
The
Ministry of Power launched the Ujwal Discom Assurance Yojna (UDAY) scheme on
November 20, 2015. This scheme seeks to improve the operational and financial
efficiency of state owned distribution companies (discoms). However, it will be
optional for states.
The accumulated losses of state-owned discoms (after
adjusting for subsidies received from state governments) rose to Rs 71,271
crore in 2013-14 from Rs 11,699 crore in 2004-05.11 Correspondingly, borrowings
by state discoms rose to Rs 4,59,145 crore in 2013-14 from Rs 1,06,509 crore in
2004-05.
Key
features of the scheme include:
Financial
restructuring: Under the scheme, states will be required to take over 75%
of the discoms‟ debt (as on September 30, 2015) over two years (50% in the
first year and 25% in the second year). For this purpose, states with the
discom debt will issue bonds in the market. The principal debt will not be
counted in the fiscal deficit of states for the first two years. For 2015-16
and 2016-17, the transfer to the discom by the state will be in the form of a
grant.
Future
losses: Under the scheme, states shall take over the future losses of
discoms in a graded manner. Henceforth, banks will not be allowed to advance
short term debts to discoms for financing their losses.
Targets:
Discoms will be required to meet certain outcome targets. These targets include
(i) reduction of aggregate
technical and commercial (AT&C) losses to 15% in 2018-19, and
(ii) eliminating the gap between average cost and
tariff by 2018-19. AT&C loss is the percentage of power procured by the
discom for which it did not receive any payment.
Benefits:
States that accept the scheme may receive additional benefits from the central
government.
These benefits will include:
(i) additional or priority
funding through certain schemes, and
(ii) supply of additional
coal at notified prices, and
(iii) Procurement of low cost
power. States not meeting the targets will not be able to claim the provided
grant.
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