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Q. UDAY scheme: Discuss the importance of UDAY Scheme.
Jan 12, 2017 Related to : GS Paper-3

Ans :

Introduction-

Recently Tamil Nadu has signed the Ujwal Discom Assurance Yojana (UDAY), the central scheme for the turnaround of financially distressed State-owned power distribution companies. Tamil Nadu has become 21st state to join UDAY scheme.

UDAY scheme-


It is the financial turnaround and revival package for electricity distribution companies of India (DISCOMs) initiated by the Central Government with the intent to find a permanent solution to the financial mess that the power distribution companies are witnessing. 

Why UDAY?

  • The aggregate technical and commercial losses, the unbilled electricity that DISCOMs generated are continued to be unacceptably high and the tariff hikes did not reflect the cost of generation and distribution.
  • DISCOMs continued to fund their losses with debt, leading to rising interest burdens and an eventual debt trap. Outstanding discom debts had reached nearly ₹4.2 lakh crore as on March 2015.
  • The earlier bail-out schemes had not succeeded because the utilities had failed to put their house in order. And it forced the Centre to come up with UDAY as an attempt to make State DISCOMs viable.
  • Under UDAY, 75% of the distribution related loans are to be taken over by the State government and bonds can be issued against them to raise fresh capital. It will helps in investing more in transmission infrastructure to enable unhindered evacuation of wind power.
  • UDAY scheme helps in improving operational efficiencies, reduction of cost of power, reduction in interest cost and enforcing financial discipline on DISCOMs through alignment with state finances.

Conclusion-

Most of the state owned power distribution companies are facing huge loss and debt. These companies have become populist tool in the hands of politician. In this backdrop UDAY schemes bring more professionalism in the operation of DISCOMs and will enhance its efficiency.    


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