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All about Ujwal DISCOM Assurance Yojana (UDAY)

[] Know in detail all about the Ujwal DISCOM Assurance Yojana including advantages and challenges faced

Ujwal DISCOM Assurance Yojana or UDAY was launched in 2015. The term “DISCOM” notes Power Distribution Companies which help reach electricity to various places in India. The primary objective of these companies is to purchase and distribute electricity distribution to all consumers.

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Why was Ujwal DISCOM Assurance Yojana launched?

DISCOMs purchase power from power generation companies. These purchases are made with the help of Power Purchase Agreements (PPAs). Recently, there has been a decline in the financial situation of DISCOMs in the country. A thorough review of these companies has reported that they are knee-deep in debt. While a majority of these companies are operated by state and central governments, authorities have been unable to solve this crisis. The detailed reports on the working of DISCOMs revealed that the cause for such large losses was the fact that companies were unable to meet the cost prices of power with their sell price. 

The Ujwal DISCOM Assurance Yojana was launched as a solution to the crisis. It is a centrally sponsored scheme, which seeks to revolutionise the financial and operational turnaround of the power distribution companies (DISCOMs). Additionally, the scheme aims to help DISCOMs reach every corner of the country and supply even the most remote places with electrical power. So far, 32 States and Union Territories, except West Bengal and Odhisha, have joined this voluntary scheme.

UDAY: Key aims

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While the main objective of the UDAY scheme was to help DISCOMs get back on their feet, there are some additional goals set for these power distribution companies. The key objectives of the scheme are:

  • Reduction in the overall costs

Outdated systems and modes of power transmission have been a source of financial loss for DISCOMs. The scheme aims to provide funds and facilities for DISCOMs to purchase the latest technologies and infrastructure upgrades which can help them drastically reduce the cost of power. The great improvement in the overall quality and efficiency of operations will also ease interest costs which add to their debt.

  • Rationalising the finances of DISCOMs 

UDAY also aims to help DISCOMs as a debt restructurer with a unique plan. UDAY seeks to improve the entire system of operation and cause the rationalisation of tariffs. It will also decide to give incremental increases in prices if required. By introducing these new systems and mechanisms, it aims to structure the DISCOMs’ financial discipline.

  • Upgrade and enhance operational efficiencies of DISCOMs

The UDAY scheme aims to intensify the very levels of operational efficiency of DISCOMs. It will implant various technological and infrastructure upgrades like the installation of smart metres, which would ensure that feeder separators are in place. It will also keep a close eye on the working of the companies by analysing the data provided. 

  • Develop a sustainable business model for Power Distribution in India 

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UDAY also seeks to turn these failing DISCOM companies into reliable and sustainable companies for the future. The UDAY scheme also wants to make sure that no theft of electricity takes place and that the entire power purchased is put into good use. The scheme would provide exclusive benefits to the singing states so that their DISCOMs become sustainable and generate good profit.

UDAY: Advantages for states participating 

UDAY also offers some exclusive benefits to the states who have signed up under this scheme. Here is a brief list of benefits the states will enjoy to help their DISCOMS become self-sustaining:-

  • Additional coal supply
  • Rationalised prices for coal
  • Coal swap facilities
  • Improving interstate transmission routes
  • Transparent bidding for purchasing power
  • Supply of washed and crushed coal

UDAY: Challenges faced

In spite of having such a promising future, the Ujwal DISCOM Yojna has faced criticism and does come with several challenges. Here are some of the challenges faced by the UDAY scheme in India:-

  • The debt of the DISCOMs have become a burden on the state government since they were directed to take over a huge chunk of the debt. Unfortunately, this situation did not eliminate the financial crisis but instead simply shifted the burden on the already suffering state governments.
  • The COVID-19 pandemic saw a shut down of various industries and enterprises for months in the end. This led to a decrease in the demand for supply and pushed DISCOMS back under the mountain of debt.
  • Uday schemes make DISCOM dependent on states for the future, which may also become a reason for their financial decline in the future. There is no guarantee the state government won’t become a problem for DISCOMs.

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Category: Must Knows

Debora Berti

Università degli Studi di Firenze, IT

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