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UDAY discoms: Why states must do their part on last-mile distribution of power and take politics out of it

8 196 20
25.10.2018

Aashish Chandorkar

What all things have happened in the Indian power sector after the Ujwal Discom Assurance Yojana (UDAY) was implemented? This has been a hot topic of discussion in the last one year or so. UDAY, launched in November 2015 by then power minister Piyush Goyal, was meant to help the state power distribution companies (discoms) improve their financial and technical health. Discoms have historically been debt-laden and loss-making. State governments would keep subsidising either the power rates for specific types of consumers, or fail to recoup the money owed to their discoms for years together. Discoms would keep accumulating losses and enter a spiralling debt-trap. UDAY tried to put an end to both the financial as well technical mismanagement.

The former Coal secretary, Anil Swarup, recently wrote how giving more power to discoms would help solve their problems. His contention is that UDAY was a top-down mandate which hasn’t worked sufficiently on the ground. Swarup has raised valid points on the accountability of states. But picture this: On March 31, 2015, the financial year base when UDAY was launched, all state discoms put together had an outstanding debt of Rs 4.3 lakh crore and accumulated losses of Rs 3.8 lakh crore. If states had either the vision or the wherewithal to do something about managing their discoms better, they would have probably done that even without UDAY.

Before UDAY, the state governments were effectively underwriting the servicing of all the debt taken by their discoms. Discoms would borrow at a much higher rate of interest compared to what states could borrow, run up a large interest bill, and effectively leave states to guarantee its payment. The financial restructuring part of UDAY converted this de facto state........

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