Context

Five years after the launch of UDAY, power-sector once again seems to be going deep into the troubles.

Where the Discoms stand now?

• Losses increased: The losses of state-owned distribution companies (discoms) risen.
• Dues increased: Discom’s dues for power purchases have also surged.
  • Dues owed by discoms to power producers, both independent and state-run entities, stood at Rs 80,930 crore.
  • Of these, Rs 71,673 crore extends beyond the allowed grace period of 60 days.
  • Rajasthan leads the states with the most dues, followed by Tamil Nadu and Uttar Pradesh.

Components of UDAY and progress made

• The UDAY scheme, which involved state governments taking over the debt of discoms, had three critical components
• First-Reduction in AT&C losses: While progress has been made on some of these fronts, it hasn’t been in line with the targets laid out under UDAY.
  • AT&C (Aggregate Technical and Commercial) losses have declined in some states, but not to the extent envisaged.
  • Under UDAY, discoms were to bring down AT&C losses to 15 per cent by FY19.
• Second- Timely revision of tariffs: While some states have raised power tariffs, the hikes have not been sufficient.
  • In tariff revision decisions political considerations prevailed over commercial decisions.
• Third- elimination of the gap between per unit of cost and revenue realised: The gap between the average cost per unit of power and the revenue realised has not declined in the manner envisaged.
  • Because of this discoms were forced to reduce their power purchases and delay payments to power producers.

Way forward:

• The new plan, being formulated by the government reportedly, aims to address these issues by-
  • Reducing electricity losses.
  • Eliminating the tariff gap.
  • Smart metering.
  • Privatising discoms.
  • Having distribution franchisees.
• Altering incentive structure: Along with the above, the Centre should also look at altering the incentive structures of states in order to ensure compliance.
• Provision of penalties: Stiff penalties need to be imposed for not meeting the targets laid out in the new scheme.

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