The Indian power sector saw the distribution companies’ (Discom) losses, which were steadily receding in the initial years post the introduction of Ujwal Discom Assurance Yojana (UDAY) in November 2015, bounce back in the financial year of 2019. This downward trajectory comes as a surprise since the scheme had advanced from Rs 51,562 crore of book losses in 2016 to Rs 15,132 crore in 2018. The financial setback, almost a double to Rs 28,036 crore compared to 2018, can be attributed to the Discom’s incompetence in bridging the ACS-ARR gap (the gap between Average Cost of Supply and Average Revenue Realised).
Missed Targets: The Struggle Continues
Despite the ambitious UDAY target to reduce Aggregate Technical and Commercial (AT&C) losses to 15% in 2019, Discoms have failed to meet expectations. The crux of the problem lies in their inability to retrieve the full cost that they shell out for power. This persistent issue caused two earlier schemes – Accelerated Power Development and Reforms Programme (APDRP) and Restructured APDRP (R-APDRP) – to fizzle out.
The Dual Components of AT&C Losses
The Aggregate Technical and Commercial (AT&C) Losses comprise of two key elements. The Technical Loss arises from the flow of power in transmission and distribution system, while the Commercial Loss results from electricity theft, deficiencies in metering, and similar factors.
UDAY Scheme: A Beacon of Hope
In November 2015, the Ministry of Power launched the Ujwal Discom Assurance Yojana (UDAY) with the intention of reviving the grim financial situation of state discoms.
The scheme’s core components include the takeover of 75% of discom debt by state governments, reduction in AT&C losses, timely tariff revisions and elimination of the gap between the Average Cost of Supply (ACS) and Average Revenue Realised (ARR) by the financial year 2019. The UDAY scheme also concentrates highly on the development of renewable energy sector and aims to provide 24*7 Power For All at an affordable price.
Operational Efficiency Goals
UDAY sets forth several other operational efficiency targets such as feeder metering, smart metering and feeder segregation etc., intending to wind up by March 2020.
Factual Overview of Discom’s Performance
| Year | Book Losses |
|---|---|
| 2016 | Rs 51,562 crore |
| 2018 | Rs 15,132 crore |
| 2019 | Rs 28,036 crore |
Conclusion
After an initial promise of success, UDAY has so far failed to fully deliver on its commitment of turning around discoms’ finances. Despite some improvement in the ACS-ARR gap and AT&C losses, the ultimate goal of profitability remains distant. The consistent inability to collect full cost of power supplied and the failure to bring down AT&C losses to targeted levels remain critical challenges that need to be addressed to ensure the long-term sustainability of discoms.
