Ujwal Discom Assurance Yojana (UDAY Scheme): Objectives & Features

States' DISCOMs or Distribution Company has suffered a substantial financial loss and accumulated outstanding debt over several years. The Indian Government launched the UDAY scheme on 15th November 2015 to improve this situation. This scheme aims to improve the operational efficiency and financial turnaround of these Power Distribution Companies. However, there are additional vital aspects that you must learn, which you can find in this upcoming segment.

What Are the Objectives of the UDAY Scheme?

The full form of the UDAY scheme is Ujwal DISCOM Assurance Yojana.

This PM UDAY scheme envisages achieving the following objectives:

This scheme aims to turn around the severe financial position of DISCOMs and improve operational efficiency.
Reduce the cost of power generation
Develop renewable energy
Encourage conservation and efficient use of energy.
Provide affordable 24x7 electricity power to all

What Are the 8 Features of Ujwal Discom Assurance Yojana?

Here are the following features of this Ujwal Discom Assurance Yojana (UDAY) mentioned below:

In Case of Financial Turnaround

1. States will take responsibility for more than 75% of DISCOMs' debts as of 30th September 2015. It was 50% for 2015 to 2016 and 25% for 2016 to 2017.

2. States will issue non-SLR and SDL bonds to clear off the outstanding debts of DISCOMs and transfer profits earned by them via a grant, loan and equity. The maturity period of bonds is 10 to 15 years, and the moratorium period is up to 5 years.

3. The rate at which the States will issue this bond is G-sec 0.5% spread and 0.25% spread for non-SLR bonds.

4. This borrowing cost will not be considered while calculating states' fiscal deficit.

To Achieve Financial Turnaround

5. 25% of debt balance will stay with DISCOMs in the following manners-

It will be issued as state-backed DISCOM bonds.
The banks or financial institutions will revise prices where interest rates should not exceed banks' base rate + 0.10%.

6. States will take responsibility for future financial losses of DISCOMs according to a graded manner.

7. The state-backed DISCOM bonds or state bonds will finance the monetary balance loss. The Ministry of Power will finalise the extent of loss and take action accordingly.

8. Jammu, Kashmir, and Jharkhand are provided with a special dispensation to clear off the outstanding dues of a Community and Public Sector Union.

How Many States Have Participated in Ujwal Discom Assurance Yojana?

UDAY covers approximately 32 states and all the Union Territories. Some of the states and Union Territories covered under this scheme are mentioned below–

Jharkhand
Andhra Pradesh
Rajasthan
Punjab
Gujarat
Uttarakhand
Telangana
Assam
Madhya Pradesh
Chhattisgarh
Himachal Pradesh
Haryana
Uttar Pradesh
Bihar
Maharashtra
Tamil Nadu
Mizoram
Karnataka
Lakshadweep, etc.

What Are the Benefits of the UDAY scheme?

Participating states will get benefits in the following ways:

The assistance of the Central Government will reduce the power cost.
State-owned DISCOMs can purchase power through transparent and competitive bidding.
This UDAY scheme ensures faster completion of inter-state transmission lines.
This scheme will boost the supply of domestic coal and rationalise coal prices.
It will also allow the supply of crushed and washed coal. Besides, it will allow purchasing additional coal and coal linkages at notified prices.
This scheme will rationalise coal linkage and allow coal swaps.
The additional funding under the Deen Dayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme etc., should be given priority.

Additionally, positive impacts of this scheme will be –

The efficient functioning of DISCOMs with solid financial footing
Rising demand for power and improvement of electricity generating plant's PLFs
It will ensure the presence of cheap funds, deductions in stressed assets, an increase in capital investments and the development of the renewable energy sector.
Altogether, it will provide access to 24x7 electricity to all.

Thus, the UDAY scheme aims to alleviate the financial situations of cash-strapped DISCOMs, enabling them to provide affordable electricity to all.