UDAY scheme loses power, sharp spike in discom losses

News:According to the data,Ujwal Discom Assurance Yojana (UDAY) which was launched to revive the electricity distribution companies(discoms) has severe shortcomings.

Facts:

Key takeaways from the data:

• The distribution companies (Discom) losses which had progressively reduced in the first couple of years since the rollout of UDAY scheme in 2015 have rebounded in the financial year 2019.
• The discoms have also missed the year 2019 UDAY target to bring down their Aggregate Technical and Commercial(AT&C) losses to 15%.
• The Book losses of discoms has reduced from Rs 51,000 crore in the financial year 2016 to Rs 15,132 crore in 2018.However, the losses in 2019 have increased to Rs 28,036 crore vis-a-vis 2018. 
• This points that discoms are lagging behind in eliminating the ACS-ARR gap (the gap between Average Cost of Supply and Average Revenue Realised).
• The primary reasons for the losses is (a)failure of discoms to collect the full cost that they pay for power and (b)delayed tariff hikes by the states.

About UDAY Scheme:

• The Ujwal Discom Assurance Yojana(UDAY) was launched by the Ministry of Power in 2015 to help turn around the poor financial situation of state discoms.

Objectives of the scheme:The scheme envisages:

• Financial Turnaround of Discoms
• Operational improvement of Discoms
• Reduction of cost of generation of power
• Development of Renewable Energy
• Energy efficiency & conservation.

Components of the scheme:

• Takeover of 75% of discom debt by state governments.
• DISCOMs to issue bonds for the remaining 25% of their debt.
• Reduction in Aggregate Technical and Commercial(AT&C) losses.
• Timely tariff revisions and elimination of the gap between the Average Cost of Supply (ACS) and Average Revenue Realised (ARR) by the financial year 2019.

Significance of the scheme:

• Financially & Operationally sound DISCOMs
• Increased demand for power
• Reduction in stressed assets
• Availability of cheaper funds
• Increased capital investment
• Development of Renewable Energy sector.