UDAY Scheme for Discoms

Jan, 23, 2019

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

Aug, 28, 2018

After Saubhagya, govt plans induction stoves for the poor


Mains Paper 2: Governance | Welfare schemes for vulnerable sections of the population by the Centre & States & the performance of these schemes

From UPSC perspective, the following things are important:

Prelims level: Saubhagya scheme

Mains level: India’s low per capita power demand & how the resolution of power sector NPAs can help boost it


Ensuring a safe cooking atmosphere

  1. The government is working on an ambitious plan to provide induction stoves to poor households in rural and urban India
  2. The scheme being explored by the Union power ministry will help reduce import of fossil fuels and generate fresh demand for electricity and consequently support underutilized power plants

Why induction stoves?

  1. Induction cooking is more efficient as energy is directly transferred to the pan
  2. India is the biggest emitter of greenhouse gases after the US and China and among the countries most vulnerable to climate change
  3. India plans to reduce its carbon footprint by 33-35% from its 2005 levels by 2030, as part of its commitments to the United Nations Framework Convention on Climate Change adopted by 195 countries in Paris in 2015

Implementation of the scheme

  1. The shift to induction cooking will be possible after the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) is implemented
  2. The scheme is expected to increase India’s electricity demand, with the centre setting a December 2018 deadline to provide electricity connections to more than 40 million rural and urban households

Increasing electrical demand

  1. The country’s energy demand is likely to go up by 2.7-3.2 times between 2012 and 2040
  2. Any substitution of fuels for cooking and heating will improve India’s per capita power consumption of around 1,200kWh, which is among the lowest in the world
  3. According to the government, the Saubhagya scheme will require an additional 28,000 megawatts (MW) of power, considering an average load of 1 kilowatt (kW) per household for eight hours in a day
  4. The measures to boost demand include setting up a pan-India power distribution company, given that the segment will be key to the long-term fortunes of the power sector
  5. Distribution companies (discoms) have so far been the weakest link in the electricity value chain
  6. Poor payment records of state-owned discoms have not only adversely affected power generation companies, but have also contributed to stress in the banking sector

Reducing NPAs too

  1. A total of 34 coal-fuelled power projects, with an estimated debt of ₹1.77 trillion, have been reviewed by the government
  2. These projects face problems such as a paucity of funds, lack of power purchase agreements and absence of fuel security
  3. Of the projects accounting for 75,000MW facing problems, those accounting for 40,000MW can be salvaged
Jun, 26, 2018

Centre cannot guarantee power supply to all villages, says official


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 and stats related to it.

Mains level: The newscard discusses the issue of discoms and highlights the role of states to give financial support to the stressed state discoms.


State DISCOMS be responsible for power supply in rural areas

  1. The Centre has claimed 100% electrification of all villages and 83% of all households across the country. It has said that all households will be electrified by the year-end.
  2. While it is the Centre’s responsibility to connect households and villages to the power grid or provide them alternative sources of electricity, it cannot guarantee the supply of electricity to them.
  3. Access to electricity also means consistent supply but that has to be done by the State governments and the discoms, said Power Ministry official.

Discrepancies in claims

  1. In some cases, the electrification infrastructure such as cables and transformers were stolen days after they were installed, leaving the target village unelectrified in reality but connected on paper.
  2. In other cases, electricity was supplied for just a few hours a day.

Rampant power cuts

  1. Despite the government pegging India as a power surplus nation, almost every State in the country reels under power cuts, especially during peak summer.
  2. This, according to power sector analysts, is because discoms are still very inefficient, with the costs they incur in the transmission far outweighing revenue.
  3. Government data show discoms across the country, on an average, lose ₹0.22 a unit of electricity supplied.

UDAY for rescue

  1. However, the Power Ministry has claimed that this situation is improving rapidly under the Ujwal Discom Assurance Yojana (UDAY).
  2. Power Minister recently said that discom losses have drastically reduced to ₹17,352 crore in 2017-18 from ₹51,096 crore in the previous year.

Way Forward

  1. While the performance of discoms is improving, they are still not at the performance level to supply electricity 24×7. The only hope of the utilities is continued assistance from the State governments.
  2. On their own, the many of the discoms right now are not ready to provide 24×7 power, for two reasons
  3. The first is their financial health. Most of them are not financially capable to do this.
  4. Secondly, only some of the discoms have the infrastructure to supply good quality power on a sustained basis.
  5. But if the respective State governments continue to give financial support and assurances to the discoms, then this could definitely improve.
Oct, 21, 2016

Discom losses may fall to 28 paise per unit by fiscal 2019

  1. Source: Crisil report
  2. Finding: The aggregate loss of distribution companies (discoms) of the 15 states that have joined the Ujwal Discom Assurance Yojna (UDAY) so far will more than halve to 28 paise per unit by fiscal 2019
  3. Earlier losses: 64 paise in fiscal 2016
  4. However, they will miss the target of zero losses by fiscal 2019
  5. Reasons for missing target: First, increase in tariff will be lower in states with a weak policy ecosystem
  6. Second, most indebted states have lesser ability to reduce AT&C losses
Oct, 01, 2016

Bonds worth Rs 1.67 lakh crore sold under UDAY

  1. Union Power Minister: So far Rs 1,67,000 crore worth of bonds have been issued under the Ujjwal Distribution Assurance Yojana (UDAY)
  2. It is now a hot property and in demand
  3. Game changer: There will be annual savings of Rs 1,80,000 crore for the country from 2019 onwards

Discuss: What are the issues faced by power distribution sector in India? How does UDAY  seek to solve them?

Jun, 23, 2016

Cabinet extends UDAY scheme deadline

  1. News: Cabinet approved an extension in the deadline for implementing the Ujjwal Discom Assurance Yojana (UDAY) by a year to March 31, 2017
  2. Context: UDAY scheme is aimed at reviving the power distribution companies (discoms) and had an initial deadline of March 31, 2016
  3. So far, 19 states have given in-principle approval to join the scheme, out of which 10 states have signed MoUs with the Centre
  4. Impact: The decision to extend the deadline will allow states, which could not participate in UDAY earlier, to join the scheme
  5. The move will also allow states who have granted an in-principle agreement, to arrange their finances better before signing the official document
Mar, 19, 2016

RBI moves to boost bonds issued by states under UDAY

  1. Context: State govts that have signed up for the UDAY scheme have started issuing bonds to banks
  2. News: RBI has allowed banks to classify bonds issued by state govts as part of the UDAY scheme under held-to-maturity (HTM) category
  3. Impact: The remaining discom loans would attract lower provisioning for banks now, as they would be classified as standard
  4. Banks that have the highest exposure to discoms will benefit the most
Mar, 03, 2016

Govt. nod for UDAY bonds

  1. Context: Union govt.’s effort to revive ailing discoms through Ujjwal Discom Assurance Yojana
  2. News: The Finance Ministry has approved the issuance of  UDAY bonds by 4 states
  3. Mechanism: State govts can take over 75% of discom debt and pay back lenders by issuing bonds
  4. The scheme provides for the remaining 25% of the debt to be paid back through discom-issued bonds
  5. Challenge: Total discom debt in the country amounts to Rs.4.3 lakh crore

Read more about UDAY: Reviving Power Discoms

Jan, 28, 2016

Rajasthan Govt. signs MoU to join UDAY

  1. The Rajasthan Government and its power distribution companies or discoms signed a pact with the Centre.
  2. Under the Ujwal Discom Assurance Yojana (UDAY) aimed at relieving the debt burden of the most indebted discoms in the country.
  3. Rajasthan discoms have a total debt of Rs.80,500 crore which is 18.7 per cent of the country’s total discom debt of Rs.4.3 lakh crore.
  4. This signing of the MoUs with Rajasthan is very significant because the state’s discoms have the largest debt.
  5. Rajasthan was the first to come to meet us when we came to power to highlight this problem.
Dec, 12, 2015

Response to UDAY scheme from States positive: Centre

  1. Centre expects almost all States to join the UDAY scheme for revival of debt-laden power distribution companies by March 2016.
  2. 9 states have already signed up, including AP, Jharkhand, Rajasthan, Punjab, J&K, Uttarakhand and HP.
  3. The Union Cabinet may consider the amendments to the national tariff policy for electricity.
  4. The policy is likely to help bring in efficiency in working of Discoms and boost revenues which will in turn help attract more investments in the sector.
Nov, 10, 2015

UDAY lays thrust on 4 initiatives for financial turnaround of Discoms

  1. Improving operational efficiencies of DISCOMs.
  2. Reduction of cost of power.
  3. Reduction in interest cost of DISCOMs.
  4. Enforcing financial discipline on DISCOMs through alignment with State finances.
Nov, 06, 2015

UDAY scheme for financial turnaround of Power Distribution Companies

Ujwal DISCOM Assurance Yojna (UDAY) for financial restructuring of debt of power distribution companies.

  1. Scheme aims at financial turnaround and revival of Power Distribution companies (DISCOMs) and ensures a sustainable permanent solution.
  2. Allows power DISCOMs in selected states to convert their debt into state bonds as well as roll out number of measures to improve efficiency at power plants.
  3. It Improves operational efficiencies of DISCOMs, Reduce of cost of power, Reduce interest cost of DISCOMs, Enforce financial discipline on DISCOMs.
  4. Improve operational efficiency by swapping of coal linkages, monitoring technical and commercial (AT&C) losses , smart metering and feeder separation in states.

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.

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