UDAY not failure; new scheme likely in Budget: R K Singh

Asserting that the UDAY scheme was not a failure, Power Minister R K Singh on Monday said an improved version of the programme, meant for revival for discoms and to ensure 24X7 power, may be announced in the Union Budget later this week.

"We asked for a new (UDAY) scheme. We had discussions with the Finance Ministry... I am optimistic that the new scheme will find a place in budget," Singh said at the sidelines of the listing ceremony of the USD 750-million international bond of Power Finance Corporation (PFC) at NSE.

The minister also said it would be great if the scheme finds a place in the budget because it will address the requirements of the distribution companies... for ensuring 24X7 power supply."

The government in November 2015 had launched the Ujwal Discom Assurance Yojana (UDAY) to bring about operational and financial turnaround of debt-laden power distribution companies.

He also indicated that unlike the earlier practice of having multiple schemes, the centre would channelise all efforts through one scheme, and states would have to reduce the losses of discoms to get all the benefits.

The centre is contemplating to combine the features of UDAY scheme, Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Integrated Power Development Scheme (IPDS) under an umbrella programme.

Divulging details, the minister informed that under the new scheme the Centre will provide for assistance for reduction of losses. "That assistance will be in terms of technology and modern equipment to reduce the losses."

However, this scheme includes elements of all previous schemes. "Now, there will be only one scheme for ministry of power," he said.

He also told that the scheme has a conditionality that discoms must work out their trajectory for loss reduction.

He stressed that funds under the scheme will be released only if the trajectory is adhered to.

Targeting to cut discom losses to below 15 per cent, he said power would be sold on strong financial mechanism and the states would decide on their own subsidies.

"The UDAY scheme is not a failure. We have reduced losses of discoms from over 22 per cent to around 18 per cent...," he stated.

Last year in August the centre had made it mandatory to provide letter of credit for buying power by the discoms.

Beside, a single-day advance payment mechanism had also been introduced.

The minister also told that the government is also looking at tightening the prudential norms of the REC and PFC.

He explained that PFC and REC would not be able to finance those firms or discoms which are would not reduce losses.

In her maiden budget speech last year, Finance Minister Nirmala Sitharaman had said, “Our government launched UDAY in 2015 aimed at the financial and operational turnaround of discoms. The government is examining the performance of the scheme and it will be further improved.”

The UDAY scheme was aimed at reducing interest burden, cost of power and losses in the distribution sector, besides improving the operational efficiency of discoms within a turnaround period of three years.

Meanwhile, at the same event, PFC CMD Rajeev Sharma said the company's single largest bond attracted demand of USD 2.2 billion and was priced at 3.95 per cent coupon rate for tenure of 10.25 years taking the total foreign borrowings to USD 6 billion.