‘Centre’s much-hyped UDAY will add to power distribution sector’s woes’

Taking aim at the government’s Ujjwal Discom Assurance Yojna (UDAY), the Consumer Unity and Trust Society International (CUTS) said the scheme is only going to add to the woes of the electricity distribution sector already burdened with huge losses. The problems abound as the sector is weighed down by freebies, transmission and distribution (T&D) leakages and other regulatory issues.

“Unless these issues are addressed squarely, the scheme will not succeed,” CUTS, a non-governmental organisation which works for economic equity, said. Giving a perspective, Pradeep S Mehta, Secretary General, CUTS International, said, “The outstanding debut of the discoms swelled to Rs 4.3 lakh crore in 2014-15, from 2.4 lakh crore in 2011-12, and their operational losses are being funded by debt, leading to banking stress.”

According to Central Electricity Authority’s estimates, one of the major challenges has been containing the massive T&D losses at around 23 per cent, which are an offshoot of poor operations and oversight, Mehta said here. He made out a case for a carrot-and-stick policy, which “must be adopted” to get discom managers to check T&D losses which are mostly caused by theft and dacoity.

Mehta also flagged some regulatory concerns, saying “regulators mostly do the government’s bidding” and the way out is to free them from the government’s control and make them accountable to the legislature by amending the Electricity Act, 2003. Such a proposal to keep regulators at an arm’s length has been made under the draft Regulatory Reforms Bill being steered by NITI Aayog and separately by the Debroy panel on railway reforms, he said.

Under the scheme, states have been asked to take over 75 per cent of the discom debt over the next two years against which they can issue bonds. The utilities are expected to break-even in the next 2-3 years. Future losses will also have to be taken up by the state, which is expected to put in place a monitoring mechanism for the discoms.

“However, the success of such a system remains to be seen,” he said. Other salient features include improving operational efficiencies of discoms, reduction of cost of power and reduction in interest cost of discoms. “It is important to analyse the fundamental issues of the discoms,” he added.

According to CUTS, additionally, the discoms are required to sell power at rates lower than their purchase rate and the regulator does not allow for regular corrections.

“Power subsidies are also in the interest of governments to gain political mileage, which further complicates the scene,” it added. “The true test of the success of this scheme lies in its implementation of the proposed measures, without which it may just end up being a transfer of debt from discoms to the state governments,” he said.

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