As the fear of power sector debt turning loom large and with warning over poor state finances by both the Reserve Bank of India (RBI) and the Finance Commission, the government is likely to review its flagship Ujwal Discom Assurance Yojana (UDAY) scheme.
The Ujjwal Discom Assurance Yojana (UDAY) scheme in 2015 was brought in to revive ailing state power distribution companies and make it operationally as well financially efficient.
Uninterrupted power supply is a political hot potato that can bring a government down in an election. India also managed to electrify all villages during the first tenure of the Modi government. Now, the users in these newly electrified villages would also be expecting 24×7 power supply.
An ambitious scheme of the Narendra Modi government, launched in 2015 to help embattled Indian power distribution companies, now weighs heavy on the finances of various states.
Out of the Rs 2,726-crore funding that states were supposed to provide in FY19 against the losses of their power distribution companies (discoms), they have shelled out only Rs1,311 crore, the recent study on state finances published by the Reserve Bank of India (RBI) pointed out.
Mounting losses of power discoms that have crossed $3 billion and other challenges are making the government go back to the drawing board. The urgency is apparent as a new tariff policy with an aim to empower the consumer has been sent to the Union Cabinet for approval.
Stressing that adoption of the Centre’s Uday scheme in Rajasthan by the previous BJP government led to fiscal imbalance, the 15th Finance Commission on Monday suggested that state government must give priority to tourism sector, rain water harvesting
The government is in the process of rolling out a new tariff policy and UDAY 2.0 to address the issue of losses of discoms, which is the “only difficulty” in ensuring round the clock electricity supply for all, Power Minister R K Singh said.
The Centre has proposed reduction in power sector funds of the states that would not maintain performance benchmarks set under the second version of UDAY scheme, which is at the draft stage, Power Minister R K Singh said on Wednesday.
State-run electricity distribution companies (discoms) reported a near doubling of their financial losses in FY19, in what reflected a dramatic reversal of the trend of a secular decline in losses in FY17 and FY18 thanks to the UDAY scheme.