Ujwala Discom Assurance Yojna

The Ujwala Discom Assurance Yojna is a state-backed initiative aimed at revitalizing electricity distribution companies (DISCOMs) financially and operationally. While several states have embraced this program, Sikkim, Karnataka, Kerala, West Bengal, and Odisha.

Objectives for Ujwala Discom Assurance Yojna

UDAY aimed to cut technical and commercial losses in the power sector from 22% to 15% by 2018-19. It focuses on boosting operational efficiency via smart meter installations, infrastructure upgrades, and promoting energy-saving tech like LED lamps. UDAY Restructuring debt, lowering power costs and interest payments, and improving operational abilities also aim to ease financial strains on DISCOMs.

Benefits for Ujwala Discom Assurance Yojna

Increased domestic coal supplies.
Coal linkages are allocated at notified pricing.
Coal price rationalization
Allowing coal swaps and rationalizing coal linkages.
Supply of washed and crushed coal.
Additional coal at predetermined pricing.
Interstate transmission lines will be completed more quickly.
Power is purchased through open competitive bidding.
Programs such as the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and the Integrated Power Development Scheme (IPDS) will provide heightened financial priority to these states.

Challenges

Despite targeted reductions in Aggregate Technical and Commercial (AT&C) losses by 15%, many states still grapple with losses exceeding 40%. Seven states, including Tamil Nadu, Telangana, Kerala, Gujarat, Andhra Pradesh, Goa, and Himachal Pradesh, have kept losses under 15%. However, the increase in renewable energy usage has raised the average supply cost, prompting authorities to penalize Discoms.

Achievements

The UDAY initiative launched successfully, garnering participation from numerous states. As part of the initiative, several states assumed the debt of their utilities, thereby enhancing their liquidity. Encouragingly, there is evidence indicating an improvement in the power supply situation. Under UDAY, the government’s efforts helped debt-ridden Discoms in 24 states reduce losses, cutting them from Rs 515.9 billion in the preceding financial year to Rs 369 billion in 2018. Additionally, participating states collectively observed a 1% improvement in aggregate technical and commercial (AT&C or distribution) performance.

Reasons

In policy circles, a recognized primary factor behind failure is the inability of Discoms to recover the full cost of power. On average, losses, encompassing technical and commercial aspects, hover around 22%, with some Discoms experiencing even higher losses exceeding 40%. The potential to reduce losses from 40% to 15% exists without requiring significant infrastructure changes.investments.

The governance challenges associated with the scheme are multifaceted. Among the monitored parameters, loss levels and the variance between ACS and ARR stand as the most prominent. However, these metrics present inherent challenges due to their fluctuating nature, making quarterly trend predictions arduous. Consequently, this complexity hinders the efficient and timely disbursement of funds.

UDAY 2.0

In the Union Budget 2020-21, the Indian government introduced the ‘UDAY 2.0’ initiative with the objective of implementing smart prepaid meters, ensuring timely payments by DISCOMs, securing short-term coal availability, and revitalizing gas-powered plants. Finance Minister Nirmala Sitharaman also unveiled a substantial Rs. 3.05 lakh crore (US$ 41 billion) initiative aimed at revitalizing DISCOMs and establishing a framework that allows electricity consumers to choose their service providers over a five-year period. Sitharaman emphasized that Uday 2.0 represents a progression from the original Uday initiative, integrating development funding for strengthening electricity distribution utilities. The infusion of funds under the combined scheme will be contingent on achieving Uday 2.0 milestones.