Narendra Modi government’s ambitious discoms’ rescue scheme, UDAY, recently witnessed a huge success with both Haryana power distribution companies posting profits after a gap of 15 years. However, the story is slightly different in Uttar Pradesh as the state discom, Uttar Pradesh Power Corporation Ltd, is grappling with dues. The cash-strapped discom is dealing with power theft, outstanding bills and defaults from government’s own departments.
“Though we have been able to bring the cash gap under control, we are nowhere near our target,” a senior official of UPPCL told the Financial Express. “UPPCL’s cash gap is increasing mainly due to government departments not making regular bill payments,” the official added. Several government departments together owe UPPCL Rs 10,400 crore.
Launched in 2015, the Ujwal DISCOM Assurance Yojana (UDAY) is a financial rescue scheme that absorbs discoms’ debt against targets to improve their efficiencies. An analysis by India Ratings said that the real success of UDAY lies in how quickly discoms of larger states such as Uttar Pradesh, Maharashtra, Tamil Nadu, among others turn around and make their finances self-sustainable.
A study conducted by Global Subsidies Initiative (GSI) also pointed out that after FY 2014, aggregate technical and commercial (AT&C) loss of UPPCL and other discoms increased possibly because of a decrease in collection efficiency that may have been largely propelled by “power theft and increasing arrears”. The study said that even as the state joined the scheme in January 2016, its implementation did not begin until mid-2017.
UDAY has helped reduce discom losses from Rs 51,589 crore in FY16 to Rs 35,683 crore in FY17, IIFL said in a recent recent note. However, the momentum in cutting losses was not sustained in FY18, the note added.
Out of the 31 states participating in UDAY, only six states and one Union Territory met their targets, while 13 states, including Uttar Pradesh, reported bigger AT&C losses. Some analysts, however, expect visible improvements in the financial health of “select” distribution companies in FY19.