The positive effects of the Ujwal DISCOM
(distribution company) Assurance Yojana (UDAY) on the power sector are yet to
be seen. Currently, 16 states and one union territory have joined since the inception of the
program. The Government of India launched the program in an effort to bring about the
financial turnaround of DISCOMs in the country. But, even after a year, DISCOMs
continue to struggle and in some cases their situation has worsened.
The financial health of DISCOMs has
been a primary hurdle for India in scaling its power generation, and is a major
reason behind power shortages and cuts, the lack of power for millions of
people, inflation, high interest rates for project development, and a lack of financing
in the power sector.
In November 2015, the Ministry
of Power announced
UDAY, a DISCOM turnaround program that targets DISCOM debt reduction. Out of the
29 states and seven union territories, only 18 states and one Union
Territory gave their ‘in-principle’ approval to join UDAY, and only 16 states and one union territory signed the UDAY Memorandum
of Understanding (MoU).
For the ambitious UDAY
program to succeed, power tariffs need to increase across the country but, this is yet to happen, commented an official at Haryana Electricity Regulatory
“The program needs enforcement. Right
now the Ministry of Power is focusing on making all the states join UDAY. Instead
it should focus on strict implementation of the policies and regulations put
forth under the program,” added an official at the Jharkhand State Electricity Regulatory Commission.
For UDAY to be
successful, “we need a stable government.” With changing governments, policy
implementation takes a backseat, stated an official at Uttarakhand Electricity
Rajasthan has issued UDAY bonds worth Rs.284.55 billion (~$4.19 billion) and not found sufficient takers, which has worsened the situation of DISCOMs
in the state, commented an official at Rajasthan Electricity Regulatory
Commission. The official also said that for UDAY to be a success, “the government must enforce strict
timelines and tariff hikes.”
and lenders are yet to see an impact of UDAY on the solar sector and developers
are lamenting that the on-ground reality of UDAY is different from that seen in
the ledgers and account books.
If DISCOMs are financially better off, it’s not
reflected through timely payments.
companies in the states of Rajasthan, Uttar Pradesh, Uttarakhand, Jharkhand and
Karnataka are still postponing signing PPAs leading to delays in project
commissioning. According to DISCOMs in these states, the benefits of UDAY will take time to
“As we have seen with many government programs, announcing
a targeted policy is a good first step but successful implementation and
enforcement is where the challenges are. With solar installations forecast to
double next year, the financial health of DISCOMs needs to turn around sooner
than later for the sector to flourish,” said
Raj Prabhu CEO of Mercom Capital Group. “The
industry is waiting for UDAY to start making a difference.”