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In a bid to rescue almost bankrupt state electricity retailers, the Cabinet recently approved this scheme for reviving power utilities having debt amounting to Rs 4.3 lakh crore.
UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem. It has ambitious target of making all discoms profitable by 2018-19.
The scheme will ease the financial crunch faced by power distribution companies, that has impaired their ability to buy electricity.
It is based on the premise that it is states’ responsibility to ensure that discoms become financially viable.
It has all the 3 elements —
There are various reasons that lead to Discoms becoming unsustainable over the period of time.
Almost 25% T&D ( Transmission & Distribution) losses suffered by discoms. Remaining 75% is sold at a price much lower than discoms’ procurement costs. Wondering Why??
The most obvious reason is political interference, i.e. tariff is set by a group of largely political appointees.
Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development.
Published with inputs from Pushpendra
UDAY is a very important scheme for the power sector and for India. India has more than enough power generating capacity to give power to everyone. However, distribution companies often do not have the money to buy this power and supply it to customers. The poor financial condition of discoms is due to reasons such as political interference (e.g. free power for farmers), theft etc. UDAY is meant to correct this situation, and according to reports, it is succeeding. Click on the UDAY Scheme for Discoms story to read the Backgrounder and previous news.
Rural Electrification Corporation Limited
UDAY is an important part of the ‘Digital India Initiative’. Make note of the terms for your Prelims exam.
Discuss: What are the issues faced by power distribution sector in India? How does UDAY seek to solve them?
Read more about UDAY: Reviving Power Discoms
Ujwal DISCOM Assurance Yojna (UDAY) for financial restructuring of debt of power distribution companies.
With UDAY Scheme, Union Government seeks to accelerate the process of reform across the entire power sector in order to ensure affordable and accessible 24×7 Power for All.