Ujwal DISCOM Assurance Yojana {उज्ज्वल डिस्कॉम आश्वासन योजना}

Ujwal DISCOM Assurance Yojana {उज्ज्वल डिस्कॉम आश्वासन योजना}

Updated on Jun 01, 2020

UDAY or Ujwal DISCOM Assurance Yojana is a recovery package for the companies that deal with distributing electricity in India or popularly known as DISCOMs. The government of India introduced this scheme to permanently solve the financial issues in the financially messy power distribution sector. It grants the state governments who have the DISCOMs to occupy their debts (as of 30 September, 2015) and can pay it back to the lenders by selling the bonds. DISCOMs are supposed to sell the bonds for the rest of 25% of their debt. 

This scheme was introduced by Piyush Goyal, the Minister of the State (IC) for Power, Coal and New and Renewable Energy in November 2015. However, this scheme is optional for the states to join. Jharkhand was the first State to participate in this scheme. 

Objectives of the Scheme

  • Financial Turnaround

  • Operational Improvement

  • Reduction of cost of generation of Power

  • Development of Renewable energy

  • Energy efficiency and conservation

Features of the Scheme

For Financial turnaround

  • States will occupy 75% of the DISCOM debt as on 30 September,2015 – 50% in 2015-16 and 25% Fey 2016-17.

  • States will issue non-SLR, including SDL bonds, to occupy the debts and transfer the proceeds to DISCOMs in a mixed grant, equity, and loan.

  • The maturity period of bonds: 10 to 15 years

  • Moratorium period- up to 5 years

  • Rate- G-sec plus 0.5% spread plus 0.25% spread for non-SLR

  • Borrowing will not be included in calculating for a fiscal deficit of the State.

Achieving Financial Turnaround

  • Balance of 25% of debt will remain with the DISCOMs as per the following guidelines-

    • Issued as State-backed DISCOM bonds

    • Re-priced by Banks or Fls at an interest rate not more than bank base rate + 0.10%

  • States will occupy over the future losses of DISCOMs as per the trajectory in a graded manner.

  • Balance losses will be financed through state bonds or DISCOMs bonds backed by State Government guarantee to the extent of loss trajectory finalized with MoP.

Outcomes of the Scheme

  • There will be a reduction of AT&C loss to 15% in 2018-19 per loss reduction trajectory to be finalized by the Ministry of Power or MoP.

  • And the decrease in the gap between the Average cost of Supply (ACS) and Average Revenue Realized to Zero by 2018-19 as finalized by MoP and states.

Reduction of Cost of Power

To reduce the power cost, the GOI must take these steps-

  • Increased in the supply of domestic coal

  • Rationalization in coal linkage

  • Allowing coal swaps liberally from inefficient plants to efficient plants and from plants situated away from mines to pithead plans to minimize the cost of coal production.

  • Coal price rationalization based on Gross Calorific Value (GCV)

  • Correction of coal grade slippage through re-assessment of every mine

  • Coal Indian will supply 100% washed coal for G10 grade and above by 1 October 2016.

  • The supply of 100% crushed coal from coal India by 1 April 2016.

  • Quicker completion of transmission lines and adequate transmission by 31 March, 2019 mostly through competitive binding.

  • Prospective power purchase through transparent, competitive bidding by DISCOMs.

  • Improving the efficiency of State generating units, for which NTPC would handhold.

Implementation

States will occupy over 75% of DISCOM debt as on 30 September 2015, over two decades of 50% of DISCOM debt will be taken over in 2015-16 and 25% in 2016-17. The states will release non-SLR bonds and SDL bonds in the market or directly to the respective banks. Non-SLR relationships released by the government will come with a maturity period of 10-15 years. The debt of DISCOM will be occupied in the priority of mortgage already due, followed by the debt with the highest cost. Bank will not levy any payment charge, and Debt of DISCOM will be given the top priority.

Targeted Activities

  • Robust feeder metering by 30 June 2016

  • Thorough DT metering by 30 June 2017

  • Consumer expanding and GIS mapping by 30 September 2018

  • Up gradation of DT meter by 31 December 2017

  • Smart meters for the consumers

  • AT&C losses by 15% of FY 2019

  • Elimination of ACS-ARR gap by FY 2019

Benefits for the Participating States

The states who will participate in this scheme will enjoy the following benefits-

  • There will be an increase in the supply of coal.

  • The coal linkages will be allocated at notified prices.

  • Coal price rationalization

  • Coal linkage rationalization and allowing coal swaps

  • Additional fuel will be provided at announced prices.

  • There will be faster completion of Interstate Transmission Lines

  • Power purchases through transparent, competitive bidding.

Impact of the scheme

  • Financially and Operationally sound DISCOMs

  • Increased Demand for Power

  • Improvement in PLF of generating plants

  • Reduction in stressed assets

  • Availability of cheaper funds

  • Increased capital investment

  • Development of Renewable Energy Sector

You can learn more about this scheme on its official Website - uday.gov.in

Frequently Asked Questions

Q. What is UDAY?

UDAY or Ujwal DISCORM Assurance Yojana is a financial scheme for the electricity distributing companies of Government of India.

Q. When was this scheme launched?

This scheme was launched in 2016.

Q. Who launched this scheme?

The government of India launched this scheme along with Ministry of Power.

Q. Do the citizens need to apply for this scheme?

No, it is the duty of the state officials to apply for this scheme.

Q. Which was the first state to sign under this scheme?

Jharkhand was the first state to regulate under this scheme.

Q. What is the benefit of the scheme?

The states who will participate in this scheme will enjoy financial and operational benefits if they opt for this scheme.

Q. Are there any special guidelines for Jammu and Kashmir?

Yes, the Debt taken Jammu and Kashmir will not be counted against the fiscal deficit limit and the state will be provided with special dispensation.

Q. How much debt will the states occupy?

The state will take over the 75% of the debts.

Q. What is the tenure of this scheme?

The scheme will be around for the next ten years.


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WRITTEN BY Varsha Verma

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