Chanakya IAS Academy Blog



The Government of India signed a Memorandum of Understanding (MOU) with the Government of Maharashtra and the Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) under the Ujwal DISCOM Assurance Yojana (UDAY). This took place at the two-day State Power Ministers Conference in Vadodara on 7th October, 2016.

16 states and union territories have already signed the MoU till date, Maharashtra being the seventeenth.


Ujwal DISCOM Assurance Yojana (UDAY) is the financial turnaround and revival package for electricity distribution companies of India (DISCOMs) initiated by the Government of India with the intent to find a permanent solution to the financial mess that the power distribution is in.

The main aims of the scheme:

  • improving operational efficiencies of DISCOMs,
  • reduction of cost of power,
  • reduction in interest cost of DISCOMs and
  • enforcing financial discipline on DISCOMs through alignment with state finances.

What is the scheme?

75% of DISCOM debt is to be taken by states as of September 2015 over two years - 50% of DISCOM debt in 2015-16 and 25% in 2016-17.

The DISCOM debt not taken over by the State shall be converted by the Banks and Financial Institutions into loans or bonds with interest rate not more than the bank’s base rate plus 0.1%. States shall take over the future losses of DISCOMs in a graded manner.


The Central schemes such as:

  • Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY),
  • Integrated Power Development Scheme (IPDS)
  • Power Sector Development Fund
  • other schemes of Ministries of Power and New & Renewable Energy

are providing funds for improving Power Infrastructure in the State and additional funding would be considered under these schemes.

Some demand Side interventions in UDAY

  • usage of energy-efficient LED bulbs
  • agricultural pumps, fans & air-conditioners
  • efficient industrial equipment through Perform, Achieve, Trade (PAT)

These will help in reducing energy consumption in the State.

Improvement in operation efficiency would enable the DISCOM to borrow at cheaper rates in future, for their infrastructure development and improvement of existing infrastructure.

Reduced levels of transmission and AT&C losses would mean lesser cost per unit of electricity to consumers. Further, financially and operationally healthy DISCOM would be in a position to supply more power.

Challenges ahead

This is not a new electrification programme. Several programmes have faced various hurdles before like high operational and maintenance costs. Rural economy should be boosted so that electricity becomes affordable for the rural masses.

Read 493 times Last modified on Friday, 14 October 2016 11:29

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