Power sector reforms: Top 10 things to know about discoms rescue package UDAY 

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New Delhi | November 07, 2015 11:48 AM

In a bid to rescue almost bankrupt state electricity retailers (discoms), the PM Narendra Modi Cabinet on Thursday approved a scheme called UDAY (Ujwal Discom Assurance Yojna).

power sectorUDAY will rejig Rs 4.3 lakh crore debt of the utilities besides introduce measures to cut power thefts and align consumer tariff with cost of generating electricity.

In a bid to rescue almost bankrupt state electricity retailers (discoms), the PM Narendra Modi Cabinet on Thursday approved a scheme called UDAY (Ujwal Discom Assurance Yojna). Here are top 10 points to know about the power sector reforms rescue package that is set to impact discoms:

1. UDAY will rejig Rs 4.3 lakh crore debt of the utilities besides introduce measures to cut power thefts and align consumer tariff with cost of generating electricity.

2. The Union Cabinet, headed by Prime Minister Narendra Modi, approved a scheme to ease the financial crunch facing power distribution companies, or discoms, that has impaired their ability to buy electricity.

3. Power Minister Piyush Goyal said state governments, which own the discoms, can take over 75 per cent of their debt as ofSeptember 30 and pay back lenders by selling bonds. For the remaining 25 per cent, discoms will issue bonds.

4. The central government will ease rules to allow the states participating in the scheme to borrow more and help with the additional burden.

5. The rescue plan UDAY, provides a permanent resolution of past as well as potential future issues of the sector and empowers the utilities to break-even in next 2-3 years.

6. This will be implemented through 4 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.

7. Operational efficiency improvements is proposed to be brought in by compulsory smart metering, upgradation of transformers and meters to reduce electricity lost during transmission and distribution (or theft) from around 22 per cent to 15 per cent by 2018-19.

8. By 2018-19, the gap between average revenue realised (or user charges) and average cost of supply (or cost at which electricity is procured) will also be eliminated.

9. People will not bear the cost of inefficiency of discom. It is states’ responsibility to ensure that discoms become financially viable.

10. The scheme, which is optional, will be operationalised through signing of MoU.

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