The Ujwal DISCOM Assurance Yojana (UDAY) program is helping some state-run distribution companies (DISCOMs) stuck in a debt-rut come out of the vicious spiral. Various DISCOMs across the country were financially and technologically bogged down at the time the UDAY program was launched in 2015.
The program was aimed at improving the operational efficiencies of DISCOMs, reducing the cost of power, reducing interest costs of DISCOMs, and enforcing financial discipline to help DISCOMs make a turnaround.
As of March 31, 2018, the tariff cost gap of DISCOMs across India decreased by 48 percent in the financial year (FY) 2017-18, per data provided on the UDAY portal. Most DISCOMs have revised their tariffs after joining the program, and this has helped in the goal achievement, substantially.
DISCOMs have also been implementing new technology and modernizing their infrastructure. This combined with increased revenue collection has led to low levels of aggregate technical and commercial (AT&C) losses. As of March 31, 2018, the AT&C loss levels were 18.74 percent, across all states participating in the UDAY program.
The combined accumulated losses of DISCOMs have slid to about ₹1,730 billion in FY 2017-18. Restructuring of DISCOM debt resulted in moving the debt to state governments, which in turn resulted in reduced interest rates and lower cost of debt service.
Another factor that has contributed to the reduction in losses is the dip in the unitized gap between the average cost of supply (ACS) and average revenue realization (ARR). This dip has ensured that loss rates also declined. States like Andhra Pradesh, Bihar, Gujarat, Karnataka, Kerala, Maharashtra, Madhya Pradesh, Rajasthan, Tamil Nadu and Uttar Pradesh have reduced their ACS-ARR gap by a considerable margin due to reduced power costs and improved operational efficiencies.
Among high energy consuming states, Bihar (AT&C loss of 33 percent, down from 39 percent), Uttar Pradesh (AT&C loss of 28 percent, down from 30.2 percent), Haryana (AT&C loss of 20 percent, down from 25 percent), and Rajasthan (AT&C loss of approximately 20 percent, down from 26 percent) were at the forefront in curbing power theft and improving revenues.
States like Jharkhand, Rajasthan, Bihar, and Chhattisgarh, which joined UDAY at an early stage have shown more improvement than other states. This indicates that reform is a gradual process which peaks with time.
Landed power purchase costs for DISCOMs had been increasing in the pre-UDAY period, peaking at about 7.5 percent in FY16. After the launch of UDAY, average power purchase costs have
In February 2018, Mercom had reported high AT&C losses for UDAY participants. When contacted, an official related to UDAY program said, “AT&C loss levels reduce as the year progresses due to seasonal variations of varying demand patterns, revenue collection (as in case of agricultural harvest, sowing season), subsidy releases, payment of dues by government departments and agencies. This is the sole reason there was a fluctuation in AT&C levels within the year.”
Andhra Pradesh, Maharashtra, Himachal Pradesh, Gujarat, Rajasthan, Goa, Assam, Karnataka, Haryana, and Tripura are under the UDAY program as of March 31, 2018, per government data.
As of March 31, 2018, Andhra Pradesh emerged as the top UDAY participant to bring about operational and financial turnaround. The DISCOMs in the state completed 100 percent feeder metering. Out of the targeted 8,461 urban distribution transformer (DT) metering, 5,897 was completed. The state DISCOMs completed 73,775 out of 76,087 rural DT metering.
Andhra Pradesh DISCOMs were able to attain a 100 percent feeder segregation; 1,182 out of 1,182 and provided electricity access to almost twice the targeted 283,000 unconnected households. In all, 589,000 households were provided with electricity access. The Andhra Pradesh DISCOMs declared a 8.69 percent loss in AT&C.
The union territory of Lakshadweep has become the latest signatory to the program, taking the total number of participants to 32.
Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.