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(Co-authored with Lekha Chakraborty)

The government of India launched the Ujjwal Discom Assurance Yojana (UDAY), in November, 2015, with an objective of “Power for All”. The states have, since then, been joining this scheme at varied times, and so far, 27 states and 5 Union Territories (UTs) s are part of this scheme (except Odisha, West Bengal, Chandigarh and Delhi). This ambitious project aims at improving the health of state power DISCOMs (distribution companies) - which had been incurring losses in the past - by improving their “financial” and “operational” efficiency parameters.

However, the UDAY has created pressures on state finances. The paucity of data prevents us from capturing the severity of such pressures. But there is more to the problem, than the downward risk to the State’s fisc. Researchers have tried to capture the problem using the available data in the Memorandum of Understanding (MoU) between the DISCOMs and the State governments and Ministry of Power as well as, the data available on the UDAY portal.

Has the loss of DISCOMs reduced since the inception of UDAY? The answer is ‘No’. This raises concern. Has the financial and operational efficiency of the DISCOMs improved, ex-post to UDAY? The UDAY portal data shows that the average AT&C (Aggregate Technical and Commercial) losses that should have been 15% for all the participating states by 2018-19, presently, on average, stand at 25.41% (as per the data accessed on 26 October, 2018 from the UDAY portal). The AT&C losses are still increasing in many states like Jammu and Kashmir (53.78%), Manipur (43.74%), Bihar (39.1%), Uttarakhand (40.92%), Uttar Pradesh (37.92%), Chhattisgarh (31.62%), Madhya Pradesh (31.06%), Meghalaya (34.64%), and Punjab (31.3%). The AT&C loss has risen in many States in 2018 as compared to 2017. (Table 1)

Table 1: AT&C Loss of DISCOMs
States	AT&C Loss as of May 2017 (in %)	AT&C Loss as of 26 Oct. 2018 (in %)
Chhattisgarh	19.34	31.62
Jharkhand	29.9	36.97
Madhya Pradesh	25.16	31.06
Manipur	36.89	43.74
Punjab	17.57	31.3
Uttar Pradesh	30.21	37.92
Uttarakhand	14.5	40.92
Maharashtra	18.3	19.87
Rajasthan	23.81	27.31
Tripura	16.61	23

Source: UDAY Portal as accessed on May 2017 and 26 October 2018.

Yet another financial indicator, ACC-ARR Gap (the gap between Average Cost and Average Revenue) has also widened for these states. The average ACS-ARR gap ratio should stand at 0.55 per unit kWh as per the UDAY MoU norms. This gap has widened for the states which also have AT&C losses of more than 30%. However, some states have reduced their ACS-ARR gap but are still making high AT&C losses (for instance, Uttarakhand and Uttar Pradesh). The States like Assam (1.04), Jammu and Kashmir (1.96), Jharkhand (1.85) and Manipur (1.61) have ACC-ARR gap of more than 1 per unit kWh. (Table 2)

Table 2: ACS-ARR Gap of DISCOMs
States	ACS-ARR Gap (Rs/Unit kWh) as of May 2017	ACS-ARR Gap (Rs/Unit kWh) as of 26 October 2018
Chhattisgarh	-0.15	0.5
Jharkhand	1.48	1.85
Madhya Pradesh	0.86	0.37
Manipur	0.1	1.61
Punjab	0.71	1.1
Uttar Pradesh	0.66	0.37
Uttarakhand	0.14	-0.02
Assam	0.65	1.04
Chhattisgarh	-0.15	0.5
Goa	0.95	1.17
Haryana	0.08	0.58
Tamil Nadu	0.36	0.55

Source: UDAY Portal

One plausible way to reduce ACC-ARR gap is to increase the electricity tariff, which has not been effectively implemented due to its political economy reasons. The inefficiencies in operational parameters also affect the revenue raising efforts of the DISCOMs. These include lack of effective billing procedures, lack of proper recording of the consumption of the power and also lack of upgradation of DT (Distribution Transformation) meters that can keep a check on the power theft. The status of the operational health of DISCOMs is available in the UDAY portal, for both the rural and urban areas. If we analyse the operational efficiency parameters in the states for the rural areas, we find the score to be minimal. In case of almost all the 22 states reporting data on DT metering and Smart Metering, the scores are much less than the benchmark.

The feeder-segregation scheme was launched as a separate scheme in August 2015 with the idea to gear up the separation of power feeders for domestic and agricultural use. The objective was to improve the rural electrification system in the country with a total cost of Rs. 43033 crores.¹ The progress in feeder segregation is one of the operational parameters under UDAY scheme as well. But, out of 27 States and 5 UTs, the data is only available for 17 States, within which only 6 States - Gujarat, Haryana, Punjab, Andhra Pradesh, Madhya Pradesh, and Karnataka - have been able to achieve the 100% target. All the North-Eastern states have either not reported the data or have a very low score on segregation. This low performance of operational parameters may have high repercussions on the lives of people living in these areas, as erratic power cuts reduce the socio-economic benefits that could have been made from a 24-hour continuous power supply and these states might also lag behind other states in economic growth due to poor power infrastructure. This makes the technical infrastructure a crucial part of the electrification system.

Recently, India has also introduced the ‘SAUBHAGYA’ (Pradhan Mantri Sahaj Bijli Har Ghar Yojana) scheme to connect the “unconnected households with electricity” to provide the last mile connectivity to the households by December, 2018 with the gross budgetary support of Rs.16,320 crores.² However, the UDAY portal data on access to electricity by the households thwart us from being optimistic about this target. The electrification data as reported on UDAY portal shows that the states namely Uttar Pradesh, Jharkhand, Bihar, Assam, Meghalaya and other North Eastern states still lag behind, despite all efforts under UDAY and SAUBHAGYA. The UDAY portal data revealed that the DISCOMs in North-Eastern states, Jharkhand, Uttar Pradesh and Bihar have ‘miles to go’ to reach 100% target. Even the “feeder audits” are yet to be taken up in States like Jammu & Kashmir, Tripura, Kerala, Bihar, Puducherry, Arunachal Pradesh, Nagaland and Sikkim.

The UDAY portal gives the average “All India” figures for the financial and operational parameters of UDAY in the “national dashboard”. These average figures of the financial and operational parameters show handful of improvement in October 2018, vis-à-vis with the data accessed from the portal in May, 2017 (Table 3). However, the large ACC-ARR gap as well as the AT&C losses raises real concern.

Table 3: Target vs Achievements of Operational Parameters of UDAY (all states)
Operational Parameters	as of May 2017			as of 26 Oct.2018
Operational Parameters	Progress	Target	Average	Progress	Target	Average
Feeder Metering (Urban) *	46844	42422	110.42	47071	42103	111.80	26 (24^)states
Feeder Metering (Rural) *	96977	97200	99.77	107512	98164	109.52	27 (24^) states
DT Metering (Urban) *	879540	1624193	54.15	965156	1536033	62.83	26 (24^) states
DT Metering (Rural) *	1728778	4164334	41.51	2472428	4156483	59.48	26 (22^) states
Electricity Access to Unconnected Households #	1470.16	1851.38	79.41	1798.58	2053.1	87.60	29 (24^)states
Smart Metering above 500 kWh *	132660	5011130	2.65	193115	5733302	3.37	27 (23^) states
Smart Metering above 200 kwh up to 500 kWh *	155046	17449484	0.89	191257	18429956	1.04	27 (23^)states
Feeder Segregation *	35736	61542	58.07	40574	63090	64.31	18 (17^) states
Rural Feeder Audit *	92896	97828	94.96	250458	97676	256.42	26(24^) states
Distribution of LEDs under UJALA#	2168.99	2382.96	91.02	2709.1	2299.25	117.83	26 (22^) states

Source: UDAY Portal

Note: * measured as no. of units ; # measured in lakhs; ^ indicates the original states taken up for analysis

One cannot rely on the “average performance” figure of the operational parameters of all states together, because the aggregate performance largely shows up a few states who are achievers with almost 100% achievements. It is crucial to move beyond the “fallacy of aggregation” and focus on lagging states. Our analysis based on the state-specific file sheets – State Health Cards - given in the state-wise dashboards, reveals that there are serious concerns in making the DISCOMs sustainable.

1. http://pib.nic.in/newsite/PrintRelease.aspx?relid=124450

2. http://pib.nic.in/newsite/PrintRelease.aspx?relid=171101

The authors are an Economist and an Associate Professor at NIPFP respectively.

The views expressed in the post are those of the authors only. No responsibility for them should be attributed to NIPFP.

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