Discoms bailout scheme comes with rider

Ujwal Discom Assurance Yojana (UDAY), a newly-launched debt-restructuring scheme announced by the Centre to bailout loss-making electricity distribution companies, will come with the rider that if any states wanted to avail benefit, they have to ensure 100 per cent metering of all its consumers, including agriculture pump-sets and plug theft.

The Union Cabinet on Thursday cleared the UDAY to revive power distribution and provide relief to lenders.

As per the plan, power distribution companies (discoms) have to reduce their technical and commercial losses to 15 per cent by 2018-19 against existing national average 22 per cent and eliminate the gap between Average Revenue Realised (ARR) & Average Cost of Supply (ACS) by 2018-19.

Besides, the states have to improve last-mile connection, installing separate feeder for agriculture, purchasing electricity from cheaper sources, compulsory smart metering and upgradation of transformers were other mandatory requirements for getting benefit from the scheme. 

Apart from this, the states should allow the discoms to revision of tariffs as per their requirement without any opposition. 

Adopting UDAY is optional for states, but provides the fastest, most efficient and financially most feasible way for providing 24X7 power to all. It will be operationalised through a tri-partite agreement among the Ministry of Power, state government and the discom.

"The scheme will accelerate the process of reform across the entire power sector and will ensure that power is accessible, affordable and available for all,” an official from the Ministry told Deccan Herald.

With the cumulative loss of the discoms touching Rs 4.3 lakh crore, they were not able to provide quality power and also not getting loan from financial institutions. As per the plan, the states will have to take over 75 per cent of the debt of their distribution utilities over the next two years. The state can issue bonds against this debt.

Power Minister Piyush Goyal earlier said the government aims to attract $50 billion investment in transmission and distribution sector in the next 20 years and is preparing short, medium and long term plan for strengthening the discoms.

With 40 per cent of electricity going unpaid for in some states, the discoms have no money to purchase power from market despite availability of sufficient power in the grid, he said.