From time to time, several capital infusion efforts have been launched to revive the ailing Discoms in India. How Uday Scheme is different from previous capital infusion efforts? Do you think that this scheme can put undue pressure on states' finances? Discuss.

Unlike the previous attempts which had focused largely on capital infusion into discoms, UDAY seeks financial turnaround and revival of discoms. UDAY attempts to shift the debt burden of discoms to state governments. Now states have to directly bear the entire cost of the subsidies on their budgets. UDAY is a comprehensive scheme as it provides measures for both cost-side efficiency and revenue-side efficiency. For cost-side efficiency, the scheme focuses on reduction of interestburden, reduction in fuel cost through coal swapping, coal price rationalization, time-bound lossreduction, etc. On revenue side, it proposes a strict discipline of quarterly fuel cost adjustment, annual tariff increase, etc. By providing incentives for performing states, the scheme attracts the states participation.
As the scheme is optional for state governments, its success depends on acceptance and timely implementation form the states. Regular tariff rationalisation and timely release of subsidies by state governments will improve the financials of discoms.
The success of UDAY is critical for India’s ambitious clean energy programme to combat climate change, revival of stranded thermal projects,the health of banks which have crores  discoms and the government’s vision of supplying affordable and accessible ‘24×7 power to all.’

Question for UPSC Mains:
From time to time, several capital infusion efforts have been launched to revive the ailing Discoms in India. How Uday Scheme is different from previous capital infusion efforts? Do you think that this scheme can put undue pressure on states’ finances? Discuss.

Published: March 17, 2016 | Modified:October 15, 2020

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