UDAY Scheme for Discoms

Govt must learn from its failure before launching UDAY 2.0


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

From UPSC perspective, the following things are important:

Prelims level: UDAY Scheme

Mains level: The newscard critically evaluates UDAY Scheme


  • While the Centre plans to come up with Ujjwal DISCOM Assurance Yojana (UDAY) 2.0 after the first one failed, experts highlights certain issues to prevent it against failure.
  • The Ministry of Power has put its faith in the second leg of power distribution company reforms under the UDAY 2.0.

UDAY 1.0 was a failure

  1. When the government launched UDAY in 2015, it wanted to improve the financial health and operational efficiency of the country’s debt-ridden power distribution companies.
  2. However, the scheme failed to achieve this target.
  3. According to the latest numbers, the nationwide AT&C losses stood at 18.6 per cent at the end 2017-18.
  4. So far, only seven states including, Tamil Nadu, Telangana, Kerala, Gujarat, Andhra Pradesh, Goa and Himachal Pradesh, have registered losses below 15 per cent while rest of the states have failed to achieve even this.
  5. The scheme also requires DISCOMs to bring down the gap between average cost of supply and average revenue realized to zero.
  6. Instead of reducing this gap, a number of states — Punjab, Jammu and Kashmir, Manipur and Goa — have seen this gap widen in the last few years.
  7. It added that only few states like Gujarat, Karnataka, Himachal Pradesh and Telangana have performed well on most parameters of the scheme.

Way Forward

  1. UDAY 2 addresses the problems of meter reading, billing, collections and leakages or theft.
  2. The government should ensure that short-term borrowings by DISCOMS are monitored.
  3. DISCOMS should get regular payments.
  4. All states should follow one methodology to measure aggregate technical and commercial (AT&C).

Read more about UDAY Scheme at:

UDAY scheme for financial turnaround of Power Distribution Companies

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