Why was the Ujwal DISCOM Assurance Yojana established?

DISCOMs buy electricity from power-producing firms. Power Purchase Agreements are used to make these acquisitions (PPAs). The financial status of the country’s DISCOMs has lately deteriorated. A detailed examination of these firms revealed that they are deeply in debt. Despite the fact that the bulk of these businesses are run by state and federal governments, officials have been unable to resolve the situation. A thorough investigation of the operation of DISCOMs indicated that the reason for such high losses was these firms were unable to match power cost prices with their sale prices.

As a response to the issue, the Ujwal DISCOM Assurance Yojana was established. It is a government-sponsored programme that aims to revolutionise the financial and operational revival of electricity distribution firms (DISCOMs). Furthermore, the initiative intends to assist DISCOMs in reaching every part of the country and provide electrical power to even the most distant locations. Except for West Bengal and Odisha, 32 states and union territories have voluntarily joined this system.

UDAY: Primary Goals

Whereas the primary purpose of the UDAY programme was to assist DISCOMs in regaining their footing, there are also extra objectives specified for these electricity distribution businesses. The scheme’s primary goals are as follows:

• Cost reduction in general

DISCOMs have suffered financial losses as a result of obsolete methods and methodologies of electricity transmission. The initiative intends to offer cash and facilities for DISCOMs to acquire cutting-edge technology and infrastructure enhancements that will allow them to dramatically lower their electricity costs.

• DISCOM financial rationalisation

UDAY also intends to assist DISCOMs as a debt restructurer through a one-of-a-kind scheme. UDAY aims to enhance the overall system of operation and cause tariff simplification. It will also determine whether to make further price hikes if necessary.

• DISCOMs’ operating efficiency must be upgraded and improved.

The UDAY initiative attempts to improve the efficiency and productivity of DISCOMs. It will implement several technological and infrastructure modifications, such as the deployment of smart metres, that will assure the presence of feeder separators.

• Create a long-term commercial model for power distribution in India.

UDAY also aims to transform these failed DISCOM firms into dependable and long-term enterprises. The UDAY initiative also intends to ensure that no electricity is stolen and that all of the power purchased is put to good use.

UDAY: Obstacles encountered

• Despite possessing such a good prospect, the Ujwal DISCOM Yojna has attracted backlash and faces various hurdles. The UDAY plan in India has experienced the following challenges: –

• Since they were ordered to assume a large portion of the debt, the DISCOMs’ debt has become a strain on the state government. Sadly, this circumstance did not result in the abolition of the economic meltdown, but rather pushed the burden onto already-suffering state governments.

• Various sectors and businesses were forced to close for months as a result of the COVID-19 epidemic. This reduced demand for supplies and pushed DISCOMS back under the mountain of debt.

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