UDAY Power Debt in Retrospect and Prospects: Analyzing the Efficiency Parameters

The Government of India launched the Ujwal DISCOM Assurance Yojana (UDAY), in November 2015, with an objective of “Power for All”. Under the UDAY scheme, selected States agreed to convert 75 per cent of the DISCOM’s (State Power Distribution Companies) power debt into State government non-SLR bonds, priced at not more than 75 basis points above the prevailing cut-off yield rate of government security of 10-year maturity. At aggregate level, so far, around 86 per cent of UDAY bonds have been issued - Rs. 2.32 lakh crores out of Rs. 2.69 lakh crores - across all UDAY States/UTs. Our estimates reveal that the financial and operational efficiency parameters envisaged in UDAY tripartite MoUs – between DISCOMs, the State Governments and the Ministry of Power, Government of India – have not been met by many States. Using UDAY portal data, we find that the average AT&C (Aggregate Technical and Commercial) losses that should have been 15% for all the participating states by 2018-19, presently, on average, stand at 25.41%. Yet another financial indicator, ACS-ARR gap (the gap between Average Cost and Average Revenue) has also widened for many UDAY participating states. The power tariff revisions have also not been implemented in the States -due to political economy reasons - and the operational parameters in our analysis indicate widening inefficiencies across States in power infrastructure.