In a major policy reform, the Union Cabinet chaired by Prime Minister Narendra Modi has approved a major power reform programme, Ujwal Discom Assurance Yojna, or Uday, to provide financial turnaround and revival of power distribution companies, helping them reduce their interest burden and allowing them to buy power to ensure uninterrupted supply.
As per the programme, the Centre would ease rules to allow the states participating in the scheme to borrow more and help with the additional burden. The scheme provides that the debt taken over by the states would not be added to their fiscal deficit numbers during the current and the next financial year, which many viewed as 'below the line accounting', as the true debt position of the states would not be reflected. States can take over 75% of the discom debt as of September 30 and pay back lenders by selling bonds. For the remaining 25%, discoms would issue bonds. But unlike the debt recast plan of 2012, UDAY comes with strict budgetary constraints, provisions for monthly on-the-spot monitoring by Central teams and binding operational milestones for the state government and discom. It also provides incentives for performing states and budgetary blackouts for laggards.
The new scheme, approved by the Cabinet envisages a turnaround in next 2-3 years through four initiatives - improving operational efficiencies of discoms; reduction of cost of power; reduction in interest cost of discoms and enforcing financial discipline on discoms through alignment with state finances. The turnaround involves operational efficiency of distribution such as compulsory smart metering, upgradation of transformers, meters etc, energy efficiency measures like efficient LED bulbs, reduction of the average AT&C loss from around 22% to 15% in case of agricultural pumps, fans and air-conditioners.
Further, reduction in cost of power would be achieved through measures such as increased supply of cheaper domestic coal, coal linkage rationalisation, liberal coal swaps from inefficient to efficient plants, coal price rationalisation based on GCV (gross calorific value), supply of washed and crushed coal, and faster completion of transmission lines. NTPC alone is expected to save Rs 0.35/unit through higher supply of domestic coal and rationalization / swapping of coal which will be passed on to discoms/consumers.
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