UDAY is a game changer

Minister for power, coal, new and renewable energy Piyush Goyal has scripted the Ujwal Discom Assurance Yojana (UDAY) to turn around highly indebted state power distribution companies, the weakest link in the entire electricity value chain. Efficient and healthy power distributors will be able to purchase more power from generators, while keeping consumer’s power bills to the minimum.

In an interview with Mint, Goyal explains how the government is capitalizing on improved efficiency in the entire power sector value chain to deliver affordable and uninterrupted power, and in the process, create globally competitive manufacturers in India.

Q. How is UDAY a game changer for the power sector?

A. It is. Never before in the history of India has such a comprehensive power sector reform, which has the potential to completely transform the sector into a vibrant, efficient and well-oiled state machinery, been undertaken. I call it comprehensive because of its salient features. One, it covers the entire value chain in the power sector from fuel, to generation, transmission, renewables, distribution and consumers. It has a very vast canvas determined through a bottom-up approach.

The central government has no role to play except as a catalyst, bringing together the best of ideas on the table and re-calibrating them continuously. It took us eight to nine months of extensive consultation with all stakeholders including state governments, different ministries in the central government, lenders, investors, equipment suppliers, consumer organizations, power utilities, generators, electricity authorities, coal suppliers, international gas exporters and energy-efficient equipment makers. I myself have chaired more than 200 meetings, and the power ministry, over a thousand. I talked to the finance secretaries of most of the states as they have to be on board. For consumers, including farmers, the end outcome is availability of quality, affordable power 24×7.

Secondly, businesses will come to India only in a power-surplus situation. UDAY will bring down the cost in the entire eco-system of power, coal, and renewable energy by about Rs.1.8 trillion every year by 2019 against a business-as-usual scenario. This will make distribution companies financially much better without stressing the consumer with tariff increases. Distributors will be able to buy more power to supply to consumers. Very often, state utilities do not buy electricity even if they need it, as every unit purchased increases their losses. We are changing this scenario to one where cost of power purchase is reduced and distributors are incentivized to buy more electricity and serve their consumers better. Also, the savings will enable distributors to invest in smart meters and other infrastructure. UDAY not only resolves the past mess in the sector that I inherited, but also sets a very strong deterrent against discoms slipping back to losses in the future. Read More…