Coal news and updates

UDAY dangles coal & power carrots before states

India Coal Market Watch

November 11: States that accept the government’s newly-unveiled UDAY (Ujjwal Discom Assurance Yojna) shall get the benefit of additional coal at notified prices and, in case of availability through higher capacity utilisation, low-cost power from NTPC and other central public sector undertakings (CPSUs) as well.

Further, states accepting the scheme and performing as per operational milestones will be given additional/priority funding through DDUGJY, IPDS, Power System Development Fund (PSDF) or other such schemes of the Ministry of Power (MoP) and Ministry of New & Renewable Energy (MNRE).

According to the scheme, states will fund the future losses (if any) of power distribution companies (discoms) in a graded manner. That is, the previous year’s discom losses are to be taken over by the state. For instance, in 2015-16 and 2016-17, the burden will be nil. However, in 2017-18, it will be 5% of the loss of 2016-17. In 2018-19, the percentage will be 10% of the loss of the previous fiscal (2017-18). In 2019-20, the loss burden to be taken over by the state concerned will be 25% of the previous fiscal’s and in 20-12, 50% of the preceding fiscal’s, according to a government presentation.

The loss financing, only as per the loss trajectory, has been finalised with the Ministry of Power (MoP) and only through discom bonds backed by state guarantee, revealed the official presentation, and the working capital will only be allowed up to 25% of the discom’s previous year’s annual revenues.

The aim of UDAY is to break even in the next 2-3 years, reduction in AT&C losses to 15% in 2018-19, reduction in the gap between average revenue realised (ARR) and average cost of supply (ACS) to zero by 2018-19.

UDAY also aims to make almost all discoms profitable by 2017-18.

The MoUs are to be signed between MoP, concerned state and discom(s) and the MoU targets are to be reviewed on a monthly basis by MoP.