What is UDAY? Ujwal DISCOM Assurance Yojana (UDAY) was launched by Ministry of Power in Nov 2015. UDAY provides for financial turnaround and revival of debt-ridden power distribution companies (DISCOM).
Let's discuss about Ujwal DISCOM Assurance Yojana (UDAY) in detail:
- Aim of UDAY
- Objectives of UDAY
- Salient features of UDAY
- How is UDAY beneficial to participating states?
- Impact of UDAY
- UPSC Previous Year Questions
UDAY - Ujwal DISCOM Assurance Yojana
1) Ujwal DISCOM Assurance Yojana was launch by Ministry of Power on 20-Nov-2015.
2) The first 3 states to adopt UDAY were:
- Jharkhand (1st),
- Chhattisgarh (2nd),
- Rajasthan (3rd)
3) As of July 2017, all states are covered under the scheme expect Odisha, West Bengal and Nagaland.
Aim of UDAY:
The aim of UDAY is to ensure a permanent solution to the debt-ridden Distribution utilities by:
- achieving financial stability and
- improving their operational efficiency for sustained growth.
Objectives of UDAY:
The objectives of Ujwal DISCOM Assurance Yojana (UDAY) are:
- Financial Turnaround
- Operational improvement
- Reduction of cost of generation of power
- Development of Renewable Energy
- Energy efficiency & conservation
What are the salient features of Ujwal DISCOM Assurance Yojana (UDAY)?
The salient features of Ujwal DISCOM Assurance Yojana (UDAY) are:
A. For Financial Turnaround
1) The scheme provides that States would take over 75% debt of Discoms, as on 30th September, 2015 in two years - 50% in FY 2015-16 and 25% in FY 2016-17.
2) States to issue non-SLR including SDL bonds (State Development Loans), to take over debt and transfer the proceeds to DISCOMs in a mix of grant, loan, equity.
- Maturity period of bonds - 10-15 years.
- Moratorium period – up to 5 years.
- Rate - G-sec plus 0.5% spread plus 0.25% spread for non-SLR.
3) Borrowing not to be included for calculating fiscal deficit of the State.
B. Achieving Financial Turnaround
Balance 25% of debt to remain with the DISCOMs in the following manner:
1) Issued as State-backed DISCOM bonds; or
2) Re-priced by Banks/FIs at interest rate not more than bank base rate + 0.10%
a) States to take over future losses of DISCOMs as per trajectory in a graded manner.
- 0% of loss of 14-15 & 15-16;
- 5% of 16-17;
- 10% of 17-18;
- 25% of 18-19
- 50% of 2019-20
b) Balance losses to be financed through State bonds or DISCOM bonds backed by State Govt guarantee, to the extent of loss trajectory finalised with MoP.
c) Jharkhand and J&K given special dispensation for take over of outstanding CPSU dues.
How is UDAY beneficial to the participating states?
Ujwal DISCOM Assurance Yojana (UDAY) provides following benefits to the participation states:
a) Reduction in Cost of power through Central Support:
1) Increased supply of domestic coal
2) Allocation of coal linkages at notified prices
3) Coal price rationalization
4) Coal linkage rationalization and allowing coal swaps
5) Supply of washed and crushed coal
6) Additional coal at notified prices
7) Faster completion of Interstate Transmission lines
8) Power purchase through transparent competitive bidding
b) Additional priority funding under DDUGJY, IPDS, etc.
What is the impact of Ujwal DISCOM Assurance Yojana (UDAY)?
UDAY has following positive impacts on the energy sector:
1) Financially and Operationally sound DISCOMs
2) Increased demand for power
3) Improvement in PLF of generating plants
4) Reduction in stressed assets
5) Availability of cheaper funds
6) Increased capital investment
7) Development of Renewable Energy sector
Ultimately, availability of 24*7 Power ForAll ataffordable price.
Previous Year Questions:
Q.1 Which of the following is a purpose of 'UDAY', a scheme of the government? [UPSC Prelims 2016]
a) Providing technical and financial assistance to start-up entrepreneurs in the field of renewable sources of energy
b) Providing electricity to every household in the country by 2018
c) Replacing the coal-based power plants with natural gas, nuclear, solar, wind and tidal power plants over a period of time
d) Providing for financial turnaround and revival of power distribution companies
Answer: d) Providing for financial turnaround and revival of power distribution companies
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