What is the issue?
Even after two years of UDAY scheme electricity discoms continue to perform poor, urgent reforms are needed address this.
What is the UDAY scheme?
- Ujwal Discom Assurance Yojana (UDAY) scheme was launched by the Centre in 2015.
- It aimed to rescue the trembling State electricity distribution utilities (discoms).
- Twenty-seven States and Union Territories signed up for UDAY which freed the discoms from the burden of debt that they carried.
- It committed States to assume a share of the losses of the utilities beginning from fiscal 2016-17.
What are the demands of states on UDAY?
- The share of Discom losses that states have to bear will grow from 5 per cent in 2016-17 to 10 per cent this fiscal, and eventually to 50 per cent by 2019-20.
- The discoms continue to be in trouble, unable to pay generating companies for their supplies.
- Around 21,000 MW of private coal-fired generation capacity is under stress due non-payment of debts by discoms.
- Discoms of States such as Tamil Nadu, Madhya Pradesh and Maharashtra have defaulted on their Power Purchase Agreements (PPA) obligations.
- These states are also forcing the Centre to consider options such as giving more powers to regulators to penalise discoms.
What are the basic problems in Indian electrification?
- Income mismatch - There is a mismatch between the revenues and expenses of the discoms.
- The average revenue realised by discoms per unit of electricity distributed by them is Rs.3.76 while their cost of supply is Rs.5.01 a unit, which is a deficit of Rs.1.25 a unit straightaway.
- Subsidies - The increasing base of rural electricity supply is highly subsidised and non-remunerative.
- Latest scheme Saubhagya, which promises free connections to village houses has created anxieties among the states.
- By which the supply will be billed and it will be at a subsidised rate, the States are puzzled of subsidising the supply.
- Power loss - There is an inability to control aggregate technical and commercial (AT&C) losses, it is around 22 per cent that is double the global average.
Way forward
- The status of UDAY is not surprising because it was an effective scheme to address the symptoms of the disease but not the disease itself.
- Pilferage of power, free agricultural supply, inefficient PPA are the reasons for the unrest situation faced by the discoms.
- Thus State governments have to take the issue of Discom health seriously and reform their ways of functioning.
Source: Business Line
