1. Progress made on UDAY has lustre

Progress made on UDAY has lustre

While states have done well on bond issuances and a few other parameters, a lot more is needed for the scheme to meet its goals

By: | Updated: April 17, 2017 2:59 AM
The onboarding of 26 states and one Union Territory is in stark contrast to just 10 states having joined the scheme in the same period last year. (PTI)

Restoring the health of state discoms was a challenge the government could not have ignored if it was serious about its agenda of Power for All. And, if the claims of the Ministry of Power’s Ujjwal Discom Assurance Yojana (UDAY) website are to be taken at face value, it has ensured a huge leap, what with 27 states joining the scheme and many starting to reflect the financial gains thereof. There is a caveat here though as experts believe the state discoms will have to improve their operational efficiency if they are not to fall into the debt trap again.

The onboarding of 26 states and one Union Territory is in stark contrast to just 10 states having joined the scheme in the same period last year. As of April 14, 2017, around 16 States had issued `2.32 lakh crore worth of bonds, which was 85.39% of the planned issuances of `2.72 lakh crore. The AT&C losses have come down to an average of 22.59%,while the gap between the average cost of supply and revenue realised has been reduced by 12 paise to 50 paise per kwh through cost realisation programmes, and tariff hikes.

The government has also achieved 100% urban feeder metering and 97% rural feeder metering. However, the installation of distribution transformer meters (DTM), smart meters, and feeder segregation (separate agriculture and domestic lines) — an important constituent to measure electricity theft and AT&C losses — has not taken off as required. States have managed to achieve only 2% of the smart metering target. Similarly, while the four states of Madhya Pradesh, Karnataka, Maharashtra and Gujarat have achieved 69% of the total target for feeder segregation, other states are yet to take up the exercise.

Experts believe these could be the major challenges in the way of the scheme achieving its stated objective of turning around all loss-making discoms. To achieve UDAY’s objectives, states would require huge capital expenditure, especially on segregation of feeder lines. According to a study conducted by the World Bank for Gujarat, feeder segregation would cost around `2.29 lakh per km of 11 kv line. “The only way discoms can control losses is by improving the efficiency of their operations. The AT&C losses will have to be brought to below 15%. Despite claims that the losses are falling, they are still close to 25%, and they don’t look like falling to below 15% in the next four to five years,” a senior partner with a foreign advisory firm says. In January, Jharkhand defaulted on its payments to DVC and Coal India.

As regards the installation of smart meters, DT meters, and feeder segregation, the skill readiness of the utilities remains uncertain. “The standardisation for smart meters is not yet done. Every utility comes up with different specifications. Most important, the sanctioned cost is lower than what the lowest bidder will quote,” Rohit Natarajan, Senior Research Analyst, IDBI Capital, says.

Arun Kumar Verma, joint secretary, Ministry of Power, who is overseeing the UDAY Scheme, however countered the opinion of experts. “These meters are not machines alone; there are other components such as communications and analytics attached to them. There is a strategy to be rolled out, and hence it’s time consuming. Now the tenders have started to flow. Maharashtra and Andhra have issued tenders,” he says.

“We have come far when it comes to distribution and transmission. As regards the default by the Jharkhand discom, it was a minor cash flow issue. Also, the NTPC head has gone on record to say that they do not have pending claims against any discoms now, which is a big achievement. I would just say the work is in progress and would be completed on time,” Verma adds.

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