Tamil Nadu became the 21st State to join the Centre’s Ujwal Discom Assurance Yojana(UDAY), aimed at turning around the finances of the ailing power distribution companies.
TN also signed the 24X7 Power For All document.
How Tamil Nadu benefits from this?
With Tamil Nadu joining UDAY, 92 per cent of discom debt has been covered under the scheme.
Singing UDAY, TN is expected to gain an overall net benefit of approximately Rs. 11,000 crore by way of savings in interest cost, reduction in Aggregate Technical and Commercial (AT&C) and transmission losses, interventions in energy efficiency, and coal reforms.
Under the UDAY scheme, TN will take over 75 per cent of the Rs. 30,420 crore debtof the State’s distribution company, TANGEDCO.
The State government will issue bonds to finance this debt.The remaining debt is to be re-priced or issued as State guaranteed discom bonds.
What happened to DISCOMS?
Distribution Companies (DISCOMs) in the country have accumulated losses of approximately Rs. 3.8 lakh crore and outstanding debt of approximately Rs. 4.3 lakh crore (as on March, 2015).
Thus, they are not able to supply adequate power at affordable rates, which hampers quality of life and overall economic growth and development.
In addition, default on bank loans by financially stressed DISCOMs has the potential to seriously impact the banking sector and the economy at large.
Thus, DISCOMs are trapped in a vicious cyclewith operational losses being funded by debt.
How UDAY will help DISCOMS?
The government unveiled UDAY, with the intent to find a permanent solution to the financial mess that the power distribution is in.
Adopting UDAY is optional for States, but provides the fastest, most efficient and financially most feasible way for providing 24X7 Power for All.
It empowers DISCOMs with the opportunity to break even in the next 2-3 years. This is through four initiatives:
Improving operational efficiencies of DISCOMs;
Reduction of cost of power;
Reduction in interest cost of DISCOMs;
Enforcing financial discipline on DISCOMs through alignment with State finances.
Operational efficiency improvements like compulsory smart metering, upgradation of transformers, meters etc.,
Energy efficiency measures like efficient LED bulbs, agricultural pumps, fans & air-conditioners etc. will reduce the average AT&C loss and eliminate the gap between Average Revenue Realized & Average Cost of Supply by 2018-19.
Reduction in cost of powerwould be achieved through measures such as increased supply of cheaper domestic coal, coal linkage rationalization, faster completion of transmission lines etc.,
Conclusion:
The ultimate benefit of signing the MOU would go to the people of Tamil Nadu.
Higher demand for power from DISCOMs would mean higher Plant Load Factor of generating units and therefore, lesser cost per unit of electricity thereby benefitting consumers.
Availability of 24x7 power for all would increase the economic activity and improve employment opportunities in the State.