1. UDAY scheme: Smarter operations must for success

UDAY scheme: Smarter operations must for success

The news on the Ujjwal Discom Assurance Yojana (UDAY) is a mixed bag.

By: | New Delhi | Published: August 14, 2017 3:17 AM
UDAY, UDAY scheme, UDAY narendra modi, narendra modi UDAY, Ujjwal Discom Assurance Yojana, UDAY operations, economy, industry, financial express It is estimated that UDAY has resulted in Rs 11,989 crore of savings on interest cost in nine months of FY17, while the saving on power purchase costs is estimated at Rs 2,100 crore for the five states. (Reuters)

The news on the Ujjwal Discom Assurance Yojana (UDAY) is a mixed bag. On the positive side, the financial metrics of state power distribution companies (discoms) improved in nine months of FY17, with their interest cost burden falling to 8.5%, as against 13% earlier. However, sustaining this performance would be a challenge in FY18 when UDAY’s incentives are no longer in place. The bottomline is that discoms have to improve on their operational parameters if the scheme’s benefits are to be sustained over the long term.

“Steps that culminate in the reduction of AT&C (Aggregate Technical & Commercial) losses, meeting the FY19 target of 15% losses, would be critical for the revival of discoms,” says Anujesh Dwivedi, director, Deloitte & Touche.

The overall AT&C losses for 24 states have fallen to 20.55% (as of August 11) from 23.84% in 2016, according to the UDAY Dashboard. An India Ratings report has revealed that only three states — Goa, Gujarat and Rajasthan — achieved their AT&C loss reduction target in 9MFY17. Of the 10 states which joined UDAY in FY16, the AT&C loss figures of six states — Bihar, Chhattisgarh, Jammu & Kashmir, Punjab, Uttar Pradesh and Uttarakhand — were higher than in FY16. While Haryana and Jharkhand reduced their AT&C losses, these were higher than the nine-month target.

The states’ performance with respect to the reduction in gap between the average cost of supply and average rate of return (ACR-ARR gap) has not shown much improvement either. Of the ten states that joined UDAY in FY16, only Haryana and Uttar Pradesh were able to achieve the target in 9MFY17. While Chhattisgarh and Rajasthan were able to reduce it from FY16 levels, the situation worsened in the case of Bihar, Jammu & Kashmir, Jharkhand and Punjab. “Under-achievement in ACS-ARR gap reduction by several states vis-a-vis the targeted level is a cause for concern and requires rethink of strategy,” Devendra Pant, chief economist at India Ratings tells FE.

Higher billing and collection efficiencies are a must if the discoms are to improve on their operational parameters. This would entail fast-track execution of smart metering, feeder metering and feeder segregation in both urban and rural India. As per UDAY Dashboard figures, discoms have achieved only 3% of the installation target for smart metering in the 500 KwH segment, while for the

200-500 MwH segment the achievement is even poorer at 1%. The government is working on the modalities for procurement of 5 million smart meters this year. On the front of DT Metering of transformers which helps check power theft, the states have logged achievement levels of 54% and 42% in urban and rural areas, respectively.

It is estimated that UDAY has resulted in Rs 11,989 crore of savings on interest cost in nine months of FY17, while the saving on power purchase costs is estimated at Rs 2,100 crore for the five states of Andhra Pradesh, Bihar, Assam, Haryana and Jharkhand.

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