UDAY- Ujjwal DISCOM Assurance Yojana Scheme Last Updated : 24 Aug 2019

The UDAY scheme was launched by the Ministry of Power, Government of India and was approved by the Union Cabinet on 5 November 2015. The purpose of the scheme can consist of a combined generation, transmission, and distribution undertakings. The scheme is applicable only for State-owned DISCOMs. The main objectives of the scheme are:

  • Energy efficiency and conservation.
  • Renewable energy development.
  • Reduction in the costs of generating power.
  • Improvements in operation.
  • Financial turnaround.

Features of Ujjwal DISCOM Assurance Yojana

The main features of the UDAY scheme are mentioned below:

  • While calculating the state’s fiscal deficit, borrowing will not be included.
  • The rate that is calculated is G-sec along with 0.5% spread plus an additional 0.25% spread for non-SLR.
  • Moratorium period will be up to 5 years.
  • The maturity period of the bonds will be between 10 years and 15 years.
  • Non-SLR will be issued by the states (including SDL bonds) in order to take over the debts and move the returns towards DISCOMs in a mixture of equity, loan, and grant.
  • Jammu & Kashmir and Jharkhand will be given a special dispensation for clearing of outstanding Community and Public Sector Union (CPSU) dues.
  • DISCOM bonds or state bonds will finance balance losses. They will be guaranteed by a State Government where the extent of loss will be finalised with the Ministry of Power (MoP).
  • 25% balance of the debt will stay with DISCOMs under the following conditions:
    • They will be issued as DISCOM bonds which are backed by the state.
    • The prices will be revised by banks and financial institutions, where the interest rates will not cross the base rate + 0.10%.

Advantages to participating states

Participating states will get the below-mentioned benefits:

  • There will be a priority towards additional funding under the Integrated Power Development Scheme (IPDS), Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), etc.
  • With Central Support, there will be a reduction in the pricing of power.
    • Purchase of power will be through competitive bidding and will be transparent.
    • Purchase of additional coal at declared prices.
    • Coal swaps will be permitted, and coal linkage rationalisation will be allowed.
    • Coal linkage will be permitted at declared costs.
    • Interstate transmission lines will be finished faster.
    • Crushed and washed coal will be supplied.
    • Rationalization of coal linkage.
    • A higher quantity of domestic coal will be supplied.

Significance of Ujjwal DISCOM Assurance Yojana

  • The renewable energy sector has been developed.
  • Cheaper funds are available.
  • Generating plants have better Plant Load Factor (PLF).
  • DISCOMs are operationally and financially strong.
  • Capital investment has been increased.
  • Stressed assets have been reduced.
  • Demand for power has been increased.

Working capital and future losses financing

  • Future losses of DISCOMs will be taken over by the states and the funding of losses will take place in a graded manner as mentioned below:
Financial Year Percentage of DISCOM loss for the previous year to be handled by the state
2015-2016 0% loss of 2014-2015
2016-2017 0% loss of 2015-2016
2017-2018 5% loss of 2016-2017
2018-2019 10% loss of 2017-2018
2019-2020 25% loss of 2018-2019
2020-2021 50% loss of 2019-2020

Losses are calculated based on the amount of loss that has incurred for the previous year and the current year is not considered.

  • A short-term debt advance to cover financial losses of DISCOMs will not be provided by banks or financial institutions.
  • Any losses that have occurred after 1 October 2015 will receive only a certain percentage of financing, and it will be done via DISCOM bonds that have a guarantee from the state or bonds that have been issued by the state. The borrowing will have certain limits and the cost of borrowing will be low.
  • In the case of working capital, 25% of the DISCOM’s yearly revenue will be provided by banks or financial institutions or working capital will be provided based on prudential norms.
  • For distribution businesses, banks or financial institutions can provide up to 25% of the working capital for a combined generation, transmission, and distribution undertakings. However, for remaining businesses, banks and financial institutions can make their own rules according to the prudential norms. In order to bring down the capital, this working capital is provided based on the needs via Letters of Credit.
  • The entire cost of state-owned generation and transmission undertakings must be recovered, and the state must ensure that the cost is recovered.

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