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Andhra, Jharkhand join UDAY, get Goyal’s thumbs-up

India Coal Market Watch

December 7: The state governments of Andhra Pradesh (AP) and Jharkhand have conveyed their in-principle approval to the Ministry of Power (MoP) on December 5 and 6 respectively, for joining the Ujwal Discom Assurance Yojana (UDAY). Piyush Goyal, the Union Minister of State for Power, Coal and New & Renewable Energy, congratulated the respective Chief Ministers N Chandrababu Naidu and Raghubar Das for joining UDAY.

State governments play a vital role in UDAY. The objective of the scheme is to ensure 24x7 adequate power supply. It was launched to improve financial and operational efficiencies of power distribution companies (discoms). It aims to reduce interest burden, cost of power and AT&C losses. However, according to the structure of the scheme, states would take over 75% of the debt of discoms, as on September 30, 2015 in two years. UDAY has inbuilt incentives encouraging state governments to voluntarily restructure their debts.

These incentives include taking over of discom debt by the states outside the fiscal deficit limits; and, reduction in the cost of power through various measures.

UDAY is different from the earlier restructuring schemes in several ways, including flexibility of keeping debt taken over outside the fiscal deficit limit, reduction in the cost of power and a series of time-bound interventions for improving operational efficiency. UDAY provides for measures that will reduce the cost of power generation, which would ultimately benefit consumers.