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Without improving the performance of the electricity distribution companies (DISCOMs) of the state governments efforts towards 100 per cent village electrification, 24x7 power supply and clean energy cannot bear fruit. Power outages also adversely affect national priorities like ‘Make in India’ and ‘Digital India’. In addition, default on bank loans by financially stressed DISCOMs has the potential of seriously impacting the banking sector and the economy at large.
For financial and operational turnaround of DISCOMs and to ensure a sustainable permanent solution to the problem, the UDAY (Ujwal DISCOM Assurance Yojana) was launched by the GoI, in November 2015. The scheme also aims to reduce interest burden of the DISCOMs, cost of power and their AT&C (Aggregate Transmission & Technical) losses.
Due to legacy issues, DISCOMs are trapped in a vicious cycle with operational losses being funded by debt. Outstanding debt of DISCOMs were Rs. 4.3 lakh crore by 2014-15, with interest rates upto14–15 per cent and AT&C losses as high as 22 per cent. The scheme assures the rise of vibrant and efficient DISCOMs through a permanent resolution of past as well as
potential future issues of the sector. It empowers DISCOMs with the opportunity to break even in the next 2-3 years. This is to take place through four initiatives:
(i) Improving operational efficiencies;
(ii) Reduction of cost of power;
(iii) Reduction in interest cost; and
(iv) Enforcing financial discipline.
Operational efficiency to be improved via steps such as – compulsory smart metering, upgradation of transformers, meters, etc., energy efficiency via steps like efficient LED bulbs, agricultural pumps, fans & air-conditioners etc.—to reduce the average AT&C loss from around 22 per cent to 15 per cent and eliminate the gap between ARR (Average Revenue Realised) and ACS (Average Cost of Supply) by 2018-19.
Reduction in cost of power would be achieved through measures such as increased supply of cheaper domestic coal, coal linkage rationalisation, liberal coal swaps from inefficient to efficient plants, coal price rationalisation based on GCV (Gross Calorific Value), supply of washed and crushed coal, and faster completion of transmission lines. NTPC alone is expected to save Rs. 0.35 unit through higher supply of domestic coal and rationalization and swapping of coal which will be passed on to DISCOMs.
The salient features of the scheme are as given below66:
• States shall take over 75 per cent of the DISCOM debt—50 per cent in 2015–16 and 25 per cent in 2016–17. This will reduce the interest cost to 8–9 per cent, from as high as 14–15 per cent.
• GoI will not include the debt taken over by the states in the calculation of fiscal deficit of the States in the financial years 2015–16 and 2016– 17.
• States will issue non-SLR including SDL (State Development Loan) bonds in the market or directly to the respective banks and Financial Institutions (FIs).
• DISCOM debt not taken over by the State shall be converted by the Banks and FIs into loans or bonds with interest rate not more than the
bank’s base rate plus 0.1 per cent. Alternately, this debt may be fully or partly issued by the DISCOM as State guaranteed DISCOM bonds at the prevailing market rates which shall be equal to or less than bank base rate plus 0.1 per cent.
• States to take over the future losses of DISCOMs in a graded manner.
• States accepting UDAY and performing as per operational milestones will be given additional / priority funding through Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY),Integrated Power Development Scheme (IPDS), Power Sector Development Fund (PSDF) or other such schemes of Ministry of Power and Ministry of New and Renewable Energy. States not meeting operational milestones will be liable to forfeit their claim on IPDS and DDUGJY grants.
• Such States shall also be supported with additional coal at notified prices and, in case of availability through higher capacity utilisation, low cost power from NTPC and other Central PSUs.
• UDAY is optional for all States. However, States are encouraged to take the benefit at the earliest as benefits are dependent on the performance. [By March 2017, most of the states/UTs had joined the scheme.]
Basically, financial liabilities of DISCOMs are the contingent liabilities of the respective States and need to be recognized as such. Debt of DISCOMs is de facto borrowing of States which is not counted in de jure borrowing. However, credit rating agencies and multilateral agencies are conscious of this de facto debt in their appraisals. The 14th Finance Commission also had similar observations. Similarly, the new scheme, DDUGY (Deendayal Upadhyaya Gram Jyoti Yojana), was launched to promote rural electrification. The budgetary support for continuation of the RGGVY (Rajiv Gandhi Grameen Vidyutikaran) in 12th and 13th Plans, has also been carried forward to the new scheme.
UDAY accelerates the process of reform across the entire power sector and will ensure that power is accessible, affordable and available for all. UDAY truly heralds the uday (rise), of a ‘Power’ful India.
National LED Programme: The Government of India, in January 2015, launched the 100 cities National LED Programmes with the aim of promoting
use of the most efficient lighting technology at affordable rates. This programme has two components: (i) DELP (Domestic Efficient Lighting Programme) aims to replace incandescent bulbs (77 crore) with LED bulbs (by providing LED bulbs to domestic consumers). (ii) SLNP (Street Lighting National Programme) aims to replace conventional streetlights (3.5 crore) with smart and energy-efficient LED streetlights by March 2019.
The programme is supposed to bring in multiple benefits to the economy:
(i) Demand reduction in electricity by around 21,500 MW with a monetary savings of Rs. 45,500 crore to domestic consumers and urban local bodies.
(ii) To help in mitigating climate change by cutting CO2 emission by 85 million tonnes annually. India has committed to reduce its emission intensity per unit GDP by 33-35 per cent below 2005 levels by 2030 (under its Intended Nationally Determined Contribution-INDC).
(iii) To encourage and support domestic manufacturing of LED bulbs, making it consistent with the ‘Make in India’ policy.
Besides, the government also approved the establishment of a National Smart Grid Mission (NSGM) in the power sector to plan and monitor implementation of policies and programmes related to smart grid activities in India.
AT&C Losses: Due to lack of adequate investment on ‘transmission and distribution’ (T&D) works, the T&D losses have been consistently on the higher side, and reached to the level of 32.86 Per cent in the year 2000- 01.The reduction of these losses was essential to bring economic viability to the state utilities (SEBs). As the T&D loss was not able to capture all the losses
in the network, concept of Aggregate Technical and Commercial (AT&C) loss was introduced. AT&C loss captures technical as well as commercial losses in the network and is a true indicator of total losses in the system.
High technical losses in the system are primarily due to inadequate investments over the years for system improvement works, which has resulted in unplanned extensions of the distribution lines, overloading of the system elements like transformers and conductors, and lack of adequate reactive power support.
The commercial losses are mainly due to:
(i) low metering efficiency
(ii) theft, and
(iii) pilferages
This may be eliminated by improving metering efficiency, proper energy accounting & auditing and improved billing & collection efficiency. Fixing of accountability of the personnel/feeder managers may help considerably in reduction of AT&C loss.
In December 2014, the GoI launched a new programme – IPDS (Integrated Power Development Scheme) – a centrally sponsored scheme (CSS) with a Central grant between 60 to 85 per cent. Its core aim is to attain 24x7 power supply in the country – to be achieved by strengthening sub-transmission network, metering, IT application, Customer Care Services, provisioning of solar panels, reduction in the AT&C of the state DISCOMs. This scheme subsumed the existing scheme, R-APDRP (Restructured Accelerated Power Development and Reforms Programme) of 2008.