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UDAY for Financial Turnaround of Power Distribution Companies
Nov 14, 2015

The Union Cabinet has given its approval to a new scheme moved by the Ministry of Power—Ujwal DISCOM Assurance Yojna (UDAY). UDAY provides for the financial turnaround and revival of Power Distribution companies (DISCOMs), and importantly also ensures a sustainable permanent solution to the problem.

  • UDAY is a path breaking reform for realizing the vision of affordable and accessible 24x7 Power for All.

  • It is another decisive step furthering the landmark strides made in the Power sector over the past one and a half years, with the sector witnessing a series of historic improvements across the entire value chain, from fuel supply (highest coal production growth in over 2 decades), to generation (highest ever capacity addition), transmission (highest ever increase in transmission lines) and consumption (over 2.3 crore LED bulbs distributed).

  • The weakest link in the value chain is distribution, wherein DISCOMs in the country have accumulated losses of approximately Rs. 3.8 lakh crore and outstanding debt of approximately Rs. 4.3 lakh crore (as on March, 2015).

  • Financially stressed DISCOMs are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development.

  • Efforts towards 100% village electrification, 24X7 power supply and clean energy cannot be achieved without performing DISCOMs.

  • Default on bank loans by financially stressed DISCOMs has the potential to seriously impact the banking sector and the economy at large.

  • Due to legacy issues, DISCOMs are trapped in a vicious cycle with operational losses being funded by debt. 

  • Outstanding debt of DISCOMs has increased from about Rs. 2.4 lakh crore in 2011-12 to about Rs. 4.3 lakh crore in 2014-15, with interest rates upto14-15%.

UDAY assures the rise of vibrant and efficient DISCOMs through a permanent resolution of past as well as potential future issues of the sector. It empowers DISCOMs with the opportunity to break even in the next 2-3 years. This is through four initiatives:

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.


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