Year the scheme was introduced: 5th November 2015
The Government of India launched the Ujwal Discom Assurance Yojana (UDAY) in 2015. It was designed to turn around the precarious financial position of state power distribution companies as Discoms are responsible for buying electricity from generation companies and selling to the consumers. The scheme was launched by Piyush Goyal, Minister of state for power, coal, new and renewable energy. This scheme is optional for states to join Jharkhand was the first state to join this scheme, and later on, all the states and union territories joined under the UDAY scheme.
Reason for implementation
UDAY was launched by the Government of India to rescue the country's ailing power distribution utilities (discoms) and help loss-making discoms turn around financially with support from the state government. For many decades, state discoms had been supplied electricity for low tariff for political reasons this led to insufficiency in power distribution such as large transmission and distribution losses on power strained the finances of discoms, who had started borrowing massive loans from banks to keep them running, it went of massive debt of 4.8 trillion hence, Government launched UDAY scheme to be undertaken by every state and start issuing 'UDAY bonds' to banks and other financial institutions to raise money to pay off the banks.
The leading reason for the introduction of this scheme are as follows:
1. Ujwal Discom Assurance Yojana (UDAY) aims to reduce the loss occurred technically, and commercially it decreased the loss from 22% to 15%.
2. It also helps eliminate the gap, which was present between the revenue and the cost side supply.
3. This scheme also helps in increasing operational efficiency by conducting a few compulsory smart meetings.
4. It also provides few efficiency measures such as promoting efficient LED Bulbs, fans, and air-conditioners.
5. They also help people understand how to reduce the power cost and make sure there is no power loss. Through this scheme, they aim to supply adequate power at a very reasonable price.
6. This is done so that the debt is restricted in this scheme to the DISCOMs and the states.
7. They also make sure that there is active participation from the countries. So, they provide incentives to those states which are actively participating.
Ujwal Discom Assurance Yojana (UDAY) had several negative impacts, which failed in the scheme. This scheme harmed the country's financial economy as those bonds of the UDAY scheme gave rise to several debts and liabilities. They failed to eliminate the gap, which was present between the average cost of supply and realizable revenue.
This scheme is not a failure. It has helped in reducing the average commercial loss. And this scheme was one initiative by the Government to address the challenges faced by the power sector.