Union Cabinet has given its nod to Ujwal DISCOM Assurance Yojna (UDAY) approved a scheme to ease the financial crunch facing power distribution companies, or discoms, that has impaired their ability to buy electricity.
For financial turnaround and revival of Power Distribution companies (DISCOMs) and also ensures a sustainable permanent solution to the problem.
- States will issue bonds in the market or to the lenders with interest rate not more than bank’s base rate plus 0.1%.
- Governments which can take over 75 percent of their debt as of September 30 and pay back lenders by selling bonds and the remaining 25 percent, discoms will issue bonds.
About Ujwal Discom Assurance Yojna (UDAY) :
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.
- Operational efficiency improvements are 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 percent to 15 percent by 2018-19.
- People will not bear the cost of inefficiency of discom.
- The scheme which is optional will be operationalised through signing of MoU.
Four initiatives :
- Improving operational efficiencies of discoms
- Reduction of cost of power.
- Reduction in interest cost of discoms
- Enforcing financial discipline on discoms through alignment with state finances.
Key points :
Power Minister : Piyush Goyal