Ujwal Discom Assurance Yojana (UDAY)

The Ujwal Discom Assurance Yojana (UDAY) launched by the government of India, ministry of power for the financial turnaround of power distribution companies (DISCOM) with an objective to improve the operation and financial efficiency of State-owned power distribution companies. The Union Finance Ministry has approved the proposal of four states for the issuance of Ujjwal Discom Assurance Yojana (UDAY) bonds. These four states are Uttar Pradesh, Rajasthan, Jharkhand and Chhattisgarh. These states account for around about 35% or around 1.5 lakh crore rupees of the outstanding loans of State electricity distribution utilities in the country. The UDAY scheme aims to achieve this through improving operational efficiencies of Discoms, reducing the cost of power generation by Discoms, financial turnaround of Discoms through State, the takeover of Discoms debts and financing future losses and working capital of power distribution companies. It allows state governments, which own the discos, to take over 75 percent of their debt as of September 30, 2015, and pay back lenders by selling bonds. Discoms are expected to issue bonds for the remaining 25 percent of their debt. Total discom debt in the country amounts to Rs.4.3 lakh crore. Total 16 states have agreed to join UDAY Scheme and the last one to join was Manipur and Tripura. Six states have signed the UDAY contract with the Union Government

Benefits of Ujwal Discom Assurance Yojana (UDAY):

  • Benefits of power at affordable rates
  • Benefits of Electrification of all villages and 24X7 Power For All

What is Ujwal DISCOM Assurance Yojna (UDAY)?

  1. UDAY Scheme has been launched by Union Ministry of Power for financial restructuring of debt of power distribution companies
  2. It aims for financial revival and turnaround of Power Distribution companies (DISCOMs) and also ensures a sustainable permanent solution to the problem
  3. By becoming part of it, states power DISCOMs can convert their debt into state bonds as well as roll out number of measures to improve efficiency at power plants
  4. It seeks to make DISCOMs financially and operationally healthy so they can supply adequate power at affordable rates and play important role in Union Government’s ambition of meeting target of 100% Village electrification and 24X7 Power For All

Features of Ujwal Discom Assurance Yojana (UDAY):

  1. To improve operational efficiency, the UDAY scheme has identified specific areas for improvement within a specified time frame and measured against AT & C losses as per trajectory to be finalized by the Ministry of Power (MoP) and participating States
  2. Recognizing costly power as a primary reason for the systemic financial distress of Discoms, the UDAY scheme has proposed steps to be taken to reduce the cost of power. For example, increased supply of domestic coal, coal linkage and coal price rationalization, supply of washed and crushed coal by Coal India Limited(CIL) within specified dates, allowing coal swaps from inefficient plants to efficient plants
  3. For financing future losses and working capital of Discoms, States will take over and fund future losses of Discoms in a graded manner until the financial year 2020-21. Also, lender banks/financial institutions are no longer to advance short-term loans to Discoms for financing losses but may finance Discoms’ working capital requirement by way of loans (or by letters of credit wherever possible), only up to 25% of the concerned Discom’s previous year’s annual revenue
  4. States which achieve operational milestones of the UDAY scheme will be entitled to additional/priority funding through various funds/schemes of the Ministry of power and Ministry of New and Renewable Energy

References & details:

  1. For more details about Ujwal Discom Assurance Yojana (UDAY) visit: http://powermin.nic.in
  2. Pdf download: http://powermin.nic.in/pdf/Uday_Ujjawal_Scheme_for_Operational_and_financial_Turnaround_of_power_distribution_companies.pdf
  3. http://pib.nic.in/newsite/PrintRelease.aspx?relid=130261


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