Performance of UDAY Scheme

UDAY Scheme: Relevance

• GS 3: Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

UDAY Scheme: Context

• Recently, Union Minister of Power has said in Rajya Sabha that UDAY scheme did not met its stated objectives.

UDAY Scheme: Key points

• The Minister said that private sector power distribution companies (discoms) improved efficiency levels faster than state-owned discoms under UDAY scheme between FY16 and FY20.
• The Minister has also said that discoms have faced mounting debt due to large accumulated losses and have repeatedly required financial support through government schemes.
• He also informed that state utilities have reported a fall in average reduction in (AT&C) losses to 21% in FY20 from 23.7% in FY16 and a reduction in the ACS-ARR gap to Rs 0.30 per kWh in FY20 from Rs 0.48 per kWh in FY16.
  • UDAY scheme was aimed at reducing aggregate technical and commercial (AT&C) losses for discoms to 15% and to reduce the gap between average cost of power supply and average revenue realised (ACS-ARR gap) per unit (1 unit = 1 kilowatt hour) to zero.
• UDAY was aimed at providing a permanent resolution to the financial issues in the power sector, but did not meet its stated objectives.
  • It led to government announcing a new Rs 3.03-lakh crore incentive-based reform scheme for discoms earlier this year with similar operational targets to be achieved by FY25.

About UDAY scheme

• In 2015, Ministry of Power had launched Ujwal DISCOM Assurance Yojana (UDAY) to achieve the following objectives in the power sector:
  • Financial Turnaround
  • Operational improvement
  • Reduction of cost of generation of power
  • Development of Renewable Energy
  • Energy efficiency & conservation

UDAY Scheme: Salient features

• States will take over 75% of the DISCOM debt as on Sept 30, 2015 – 50% in FY 2015-16 and 25% in FY 2016-17.
• States to issue non-SLR including SDL bonds, to take over debt and transfer the proceeds to DISCOMs in a mix of grant, loan, equity.
  • Maturity period of bonds – 10-15 years.
  • Moratorium period – up to 5 years.
• Rate – G-sec plus 0.5% spread plus 0.25% spread for non-SLR.
• Borrowing not to be included for calculating fiscal deficit of the State.

UDAY: Targeted activities

UDAY scheme: Benefits to Participating States

• Increased supply of domestic coal
• Allocation of coal linkages at notified prices
• Coal price rationalization
• Coal linkage rationalization & allowing coal swaps
• Supply of washed & crushed coal
• Additional coal at notified prices
• Faster completion of Interstate Transmission lines
• Power purchase through transparent competitive bidding

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