It has been four years since UDAY or Ujwal Discom Assurance Yojana (UDAY) was launched but the discoms are still in mega losses. The total discom losses are to the tune of Rs 16,841 crore according to the latest available published data and accounts for profit/loss after tax figures of discoms for 2017-18. Telengana, Uttar Pradesh, Madhya Pradesh and Bihar fare very poorly. The scheme was launched in 2015.

UDAY involves huge liabilities on part of states and most states – 26 states and 7 union territories – are signatories to the scheme. The borrowings due to UDAY are not included for calculating fiscal deficit of the states but that does not mean it is non-existent. The day of reckoning can be pushed down the road, it cannot be removed. So, discom reform and discipline becomes an urgent business.

The financial package rolled out by UDAY is enormous. States took over 75 per cent of the discom debt as on September 30, 2015, out of which 50 per cent was to be done in FY 2015-16 and 25 per cent in FY 2016-17 through issuance of 10 to 15-year bonds with a moratorium period of up to 5 years.

Already bonds have been floated by 16 states under UDAY to take over 75 per cent debt of discoms as it existed on September 30, 2015. This amounts to Rs 208,641 crore.

The balance 25 per cent of debt remains with the discoms as state-backed discom bonds or are being repriced by banks and FIs at base rates. Additionally, future losses of discoms being taken up by states in graded manner – 5 per cent of FY17; 10 per cent of FY18; 25 per cent of FY19 and 50 per cent of FY20, makes it a package of massive proportions.

The avowed goals of UDAY were: financial turnaround, operational improvement, reduction in cost of generation of power, development of renewable energy, and energy efficiency and conservation. Most parameters are as yet unmet, even after debts have been taken off from discom balance sheets, loss cycles are spinning. If this trend continues, the contagion may spread and spill to future years. States holding discom liabilities through borrowings should be seen as an emergency measure not as a preselected option that discoms in any case will always have. UDAY should not lead to UDAY 2.0 but to reform and financial health.