For a more detailed list of the requirements and for a detailed understanding of the scheme, refer our article here, or the scheme document here. After an year from launching, 17 states and UT\u2019s have signed up for the UDAY scheme, while 15 have not. Notable states that have not signed up include Tamil Nadu, West Bengal, Kerala, Orissa, Assam and Telangana. The UDAY scheme was launched an year ago, and was then touted as signature Discom reform scheme of the central government. In this article, we have analyzed the impact of UDAY scheme, responsiveness of the states, extent to which the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[739,133,206,356,686],"_links":{"self":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts\/3974"}],"collection":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/comments?post=3974"}],"version-history":[{"count":0,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts\/3974\/revisions"}],"wp:attachment":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/media?parent=3974"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/categories?post=3974"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/tags?post=3974"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nThese states have relatively large Discoms and, espe-cially in the case of Tamil Nadu, significant accumulated losses and bank debt. Another way to look at this is the political affiliation of the state.
\nMost states that have signed up for UDAY scheme are associated or governed by BJP. Notable exceptions are Uttar Pradesh, Karnataka and Bihar. The only notable exception amongst the states that have not signed is Assam (governed by the BJP).
\nBonds issuance:<\/strong><\/span>
\n8 states have issued bonds, aggregating to Rs 149,000 crore. The coupon rate (interest rate) on these ranges from 8.12% to 8.55%. Of the total bonds issued more than 80% are contributed by just 3 states – Rajasthan, UP and Haryana. To understand the impact of the bond issuance, we analyzed the balance sheet of one Discom (the Jaipur Discom). The key points are:
\n![\"\"](\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2017\/01\/Untitled-1.png\" "\\"Untitled")
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\n*Coupon rates are as per latest issuance<\/em>
\nTotal debt of the Jaipur Discom has reduced by Rs 5,722 crore, or 22% of the total. However, this ag-gregate number includes a significantly higher amount of debt that was directly taken by the Discom from the banks. This debt is now replaced with debt owed to the state government. Thus, while the debt burden of the Discom has not changed much, its the banks that have benefited the most – they now own government bonds (which are a very good asset to own), compared to Discom loans. The performance on the actions that the Discom\u2019s were supposed to take is analyzed below.
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\nNote : Additional Bank debt taken over in June 2016 – Rs 7,228 crore.<\/em>
\nTariff increases:<\/strong><\/span>
\nOf the 8 largest Discom\u2019s analyzed, not a single Discom undertook tariff revisions on a quarterly basis. Further, there was a wide difference between tariff increases of different Discoms. Discom\u2019s of UP, Punjab, Bihar, Jharkhand & J&K did not increase tariff at all. While Ra-jasthan increased domestic tariff by 2%, Chhattis-garh increased the same by 21%. It is important to note that while Rajasthan issued bonds of 58,000 crores, Chhattisgarh only issued bonds for Rs 870 crores (the lowest amongst all states).
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\nHaryana raised domestic tariff by a respectable 19%Industrial tariff increased also show a similar story – Rajasthan raised tariffs by 1.67%. ,Haryana by 0.98%, while Chhattisgarh by 18%. Other states did not raise tariffs.
\nRenewable Purchase Obligations:<\/strong><\/span>
\nAn important requirement of the UDAY scheme was that Discom\u2019s were to be fully complaint of RPO \u00a0from April 1, 2012 onwards. The scheme document says the following with regards to RPO –
\n\u201cClause 9 – DISCOM\u2019s opting for the scheme will comply with the Renewable Purchase Obligation (RPO) outstanding since 1st April 2012, within a pe-riod to be decided in consultation with MoP\u201d<\/strong><\/em>
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\nHowever, the MoU entered between the Ministry of Power and the Discom\u2019s is completely silent on the RPO requirement. Prima facie, it appears that this point has been dropped by the Ministry. The only exception is the MoU with UP Discom, which has the following provision.
\n\u201cClause 1.3 (f) – In compliance with the Renewable Purchase Obligation (RPO) outstanding since 1.4.2012 to 31.3.2015, Discoms of UP shall fulfill RPO obligation 3 years after the Discom reaches break-even i.e. the Financial year 2019-20\u201d<\/strong><\/em>
\nThis clause presents several legal and practical prob-lems that will impact the REC markets significantly. Firstly, it is in direct contravention to the Electricity Act 2003 which obligates RPO on all consumption.
\nThere is no provision for waiver or roll forward of such obligations. In light of this, can the MoP and UP Discom circumvent an act of the parliament and mutually decide a timeline for compliance? Further, the MoU wordings itself leave ample scope for further delay\/ waiver when it says – \u201c...3 years after the Discom reaches break-even<\/strong><\/em>\u2026\u201d. If the Discom does not reach break-even does that mean it will get further time?
\nIn short, the original intent of the UDAY scheme re-sulting in RPO compliance has been abandoned by the Ministry of Power itself.
\nReduction in AT&C losses:<\/strong><\/span>
\nAT&C losses remain very high for most Discom\u2019s in the country. This is due to several reasons – weak distribution infrastructure being one. However, this caption is also a proxy for un-checked theft of power and un-metered supply. Even without the UDAY scheme, AT&C losses have been declining. However, since this data becomes available only at the time of ARR filing by the Discom, it is not possi-ble to verify if the decline has accelerated after the adoption of UDAY.
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\n*Source: Forum of Regulators (FoR) Report<\/em>
\nConclusion:<\/strong><\/span>
\nThe UDAY scheme has resulted in significant redrawing of the balance sheet of the Discoms. The beneficiaries of the scheme have been the banks, which were sitting on unsustainable levels of debt with loss making enti-ties. This debt has now been replaced with high quality government debt. However, in terms of real reforms and changes on the ground, whether relating to tariff increases or RPO compliance, there seems to be little that is changing. Unless the government follows through with actual op-erational changes, the story is likely to repeat itself over the next 5-10 years, where Discom\u2019s will have again built up unsustainable debt and losses.
\nOur previous blog on Uday scheme can be accessed\u00a0here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"