The government is in the process of rolling out a new tariff policy and UDAY 2.0 to address the issue of losses of discoms, which is the “only difficulty” in ensuring round the clock electricity supply for all, Power Minister R K Singh said.
 
 
According to the PRAAPTI portal, the total outstanding of the discoms to gencos as of July this year stood at Rs 73,425 crore, including the overdue amount of Rs 55,276 crore. The dues to discoms become overdue after 60 days of non-payment of the bill, allowing gencos charge penal interest on that. There is a capacity to transfer (supply) any quantum (of power). There is no reason why 24X7 power cannot be given. The only difficulty in this (24X7 power for All) is losses to some distribution utilities. They don’t have money to pay for power.
 
What
  1. The central government has already made it mandatory for discoms to open letters of credit for getting supply from gencos, excluding state government power plants from August 1, 2019. 
  2. The mandatory opening of letter of credit, would take some time to reduce stress on power generation companies. New tariff policy has already gone to the Cabinet for vetting and approval while the power ministry is working on the UDAY 2.0 scheme which would be launched this fiscal only. 
  3. Under the new tariff policy, the discoms would have to pay a surcharge for delayed payment, which would be equal to the commercial rate of interest.
  4. On the under-recovery of cost of supply of power, Government said, “Discoms cannot put the burden of their inefficiencies on consumers. Earlier they used to charge under-recovered power supply cost to other consumers. 
  5. Around 70 per cent consumers used to pay for 100 per cent consumers. This is injustice., “Now have given an option of 15 per cent. Now would allow recovery of up to 15 per cent under-recovered power supply cost from the tariff of other consumers. If your loss is beyond 15 per cent then discom or state government would pay for that. This is the consumers’ right.”
  6. Under the new tariff policy, a provision for standards of service which would provide timeline for various services like time period for replacing a burnt transformer etc. The tariff policy provides that the Central Electricity Authority (CEA) would set standards of service and there would be a penalty for not meeting those standards.
  7. UDAY 2.0 provides that the funds from the Centre would only be released if the discom takes steps to reduce losses. They would not get any grant. 
  8. They would also not get loans from PFC and REC. These are incentives and disincentives to reduce losses. You may call it UDAY 2.0. It is aimed at reducing losses of discoms and strengthening the distribution system. We want to roll this out this fiscal year.
 
Flashback
  1. The Centre in November 2015 had launched the Ujwal DISCOM Assurance Yojana (UDAY) to bring about operational and financial turnaround of debt-laden power distribution companies. 
  2. Finance Minister Nirmala Sitharaman in her budget speech in July had said, “Our government launched UDAY in 2015 aimed at financial and operational turnaround of DISCOMs. The government is examining the performance of the scheme and it will be further improved.”
  3. About bringing investments in the power sector, “There should be demand. We have provided in tariff policy that discom would tell regulator about power demand in their area every year and we have arranged for that supply. 
  4. The demand would translate into PPA (power purchase agreement) and it would bring investment into power generation.
  5. Investors would invest in the power sector only when there would be payment for power supplied. We have fixed that by making the opening letter of credit mandatory for getting power supply by discoms from August 1, 2019.
 
 
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