Challenges of the power sector Context

Most of the problems in power sector discoms (distribution companies) are linked to poor performance of the area. In view of these problems, ‘Uday’ (Bright Discom Assurance Plan) scheme was launched in 2015 which was a good initiative in terms of thought. This scheme was more successful in a state like Gujarat, and due to this scheme, very positive changes were seen in the power sector in this state too. As a result, ‘Uday’ will become a model plan for other parts of the country, however, this scheme has provided only temporary relief to these distribution companies and this scheme has not received positive results in the remaining states as it was expected. Now the question is, what is the Uday Yojana and what are the characteristics related to it, whose benefits have not reached its expected beneficiaries?

What is Uday’s plan?

  • On December 5, 2015, the Union Cabinet approved the bright discom assessment scheme or ‘Uday’ (UDAY) under the chairmanship of Prime Minister Narendra Modi.
  • Uday was started to improve financial and operational efficiency of the power distribution companies (discoms).
  • The scheme provides for reducing the loss of interest, electricity costs and total technical and commercial losses (AT & C LOSS). As a result, the disks will be able to supply enough and reliable power for 24 hours continuously.
  • In this scheme, there is a provision for encouraging the state government to voluntarily reorganize their loans.
  • Under the Uday Yojana, the following four initiatives have been taken to overcome power distribution companies for the next two to three years, which are as follows:

में Improve operational efficiency of power distribution companies. 

में Lack of electricity costs 

में Decrease in interest cost of distribution companies. 

सन Apply financial discipline to power distribution companies through coordination with State Finance Commission.

Main features

  • 75% of the distribution companies will be acquired by the states in two years and this acquisition will be 50% in year 2015-16 and 25% in 2016-17.
  • Under the Uday Yojana, the loans acquired by the states will not be included in the calculation of the fiscal deficit of the respective states in the 2015-16 and 2016-17 fiscal year by the Indian government.
  • The loans of the distribution companies, which will not be acquired by the state, will be converted into loans or bonds by the financial institution / bank.
  • Under this scheme, the average AT & C loss should be reduced from about 22% to 15%, with the mandatory smart metering and its operational efficiency, upgradation of transformers and meters etc., with measures related to economical energy like effective LED bulbs, agricultural pumps, wings and air conditioners etc. Will be reduced.
  • The difference between average revenue receipt (ARR) and supply cost (ACS) will be eliminated by 2018-19.
  • Significantly, the Uday Yojana is optional for all states.

Challenges from implementation

  • Most Discom AT & C losses have been unable to eliminate the ACS-ARR interval and meet similar rules. Ironically, 13 of all emerging states have actually reported high AT & C deficit compared to the previous year.
  • Along with the dilemma of determining the cost of electricity, the more disks available, the greater the disadvantages of the discoms. As a result, this lack of demand is negatively affecting power disks in return.
  • The reason for the poor financial position of discoms is the increasing amount due to which Gencos (a regulated or non-regulated company that is fully engaged in power generation) i.e. a company that generates energy has to pay.
  • Due to poor financial condition of the discom, power demand in the form of electricity purchase agreement (PPA) also affects.
  • There are also other factors affecting Gencos that harm its finances, but the above two reasons mainly contribute more.
  • So discoms are unable to repay their debt and their losses of Rs 1.7 lakh crore in the near future are likely to soon become NPAs.
  • This will affect both coal and banking industry. Since gencos are not getting their dues from the distribution companies, they are unable to pay Coal India regularly and the outstanding amount is more than Rs 10,000 crore.
  • The banking industry, which is already under pressure, increases the potential problem of potential NPA due to non-executed Gencos.
  • Thus, the problem of financial loss, ie the financial loss, has affected the power sector and if these issues are not resolved quickly, then serious crisis can occur that can affect the entire economy.

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