High efficiency, low losses: Under UDAY, pvt discoms improved over state utilities

UDAY was aimed at reducing aggregate technical and commercial (AT&C) losses for discoms to 15 per cent and to reduce the gap between average cost of power supply and average revenue realised (ACS-ARR gap) per unit (1 unit = 1 kilowatt hour) to zero.

Union Power Minister RK Singh, in a written reply to a question in the Rajya Sabha, had said that state utilities reported a fall in average reduction in (AT&C) losses to 20.9 per cent in FY20 from 23.7 per cent in FY16 and a reduction in the ACS-ARR gap to Rs 0.30 per kWh in FY20 from Rs 0.48 per kWh in FY16.
Discoms have faced mounting debt due to large accumulated losses and have repeatedly required financial support through government schemes.

UDAY was aimed at providing a permanent resolution to the financial issues in the power sector, but did not meet its stated objectives, leading the government to announce a new Rs 3.03-lakh crore incentive-based reform scheme for discoms earlier this year with similar operational targets to be achieved by FY25.

Private sector discoms such as those in Delhi, Maharashtra and West Bengal that were not part of UDAY and were already more operationally efficient than state discoms improved faster than state discoms during the period.

The average AT&C losses for private sector discoms, including those in Delhi, Maharashtra, Gujarat, Uttar Pradesh and West Bengal, fell from 12.4 per cent in FY16 to 8.0 per cent in FY20.

Private sector discoms also improved the average ACS-ARR gap from minus Rs 0.1 per unit (indicating revenue levels higher than cost) to minus Rs 0.48 per unit in the same period.

State discoms showed slower operational improvement from an average AT&C loss level of 24.0 per cent in FY16 to 21.7 per cent in FY20. However, they failed to achieve the target of bringing the ACS-ARR gap down to zero, bringing it down from Rs 0.50 per unit in FY16 to Rs 0.35 per unit in FY20.

The government is set to introduce a Bill to amend the Electricity Act in the ongoing Winter session of Parliament which would allow the entry of competition for all discoms with a view for pushing existing discoms to improve operational efficiency as well as service to all consumers.