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First MOU on “UDAY” signed , Heralds the onset of major power distribution reforms in the country

First MOU on “UDAY” signed , Heralds the onset of major power distribution reforms in the country


The Government of India, the State of Jharkhand and the JBVNL (Jharkhand Bijli Vitran Nigam Limited) signed a Memorandum of Understanding (MOU) under the Scheme UDAY – “Ujjwal Discom Assurance Yojana” here today. The MoU for operational & Financial turnaround of Discoms was signed by Dr A.K Verma, JS (Distribution), Ministry of Power, Shri S.K.G Rahate Principle Secretary (Energy), Jharkhand and Shri Ameet Kumar, MD, Jharkhand Bijli Vitaran Nigam Ltd (JBVNL) in presence of Chief Minister of Jharkhand Shri Raghubar Das, Shri P.K Pujari, Secretary, Ministry of Power, Shri Upendra Tripathy, Secretary, Ministry of New & Renewable Energy, Shri Anil Swarup, Secretary, Ministry of Coal and Shri Rajiv Gauba, Chief Secretary, Jharkhand. Jharkhand would derive an overall net benefit of approximately Rs. 5,300 Crores through UDAY. Signing of this MOU heralds the onset of major Distribution reforms in the country under UDAY.

Speaking on the occasion, Shri Raghubar Das, Chief Minister of Jharkhand said that this is a historic moment in history of power sector of the country. The MoU will help in electrifying remaining 2200 villages in state and thereby making the Prime Minister, Shri Narendra Modi’s vision of providing 24×7 electricity to all, a reality. He also informed that the Jharkhand government is planning to provide off-grid power in 434 villages due to their geographical barriers. Shri P.K Pujari, Secretary, Ministry of Power said that UDAY will usher new dawn in Nation’s Power Distribution sector. He further added that the scheme has addressed concerns of all the stakeholders and thus become a win-win situation for all of them.

The signing of the MOU would have significant benefits for the JBVNL, with the state of Jharkhand taking over 100% liabilities of outstanding dues with CPSUs and 75% of the outstanding debts of JBVNL as existing on 30.09.2015. The JBVNL would have annual savings of almost Rs 115 crore as annual interests costs through reduction of debts of JBVNL from Rs 1165 crore to Rs 291 crore, i.e by an amount of Rs 874 crore. The balance debt would be repaid with fresh State guaranteed DISCOM bonds to be issued at coupon rates around 3% less than the average existing interest rate. As a special dispensation, the JBVNL would also be able to wipe out its outstanding dues amounting to Rs 6000 crore to the Central Public Sector Undertakings. This would help the DISCOM to save more than Rs 1000 crore annually by way of surcharge on outstanding dues to Power Generators.

Sustainability of operational and financial performance is at the CORE of UDAY. Through UDAY, the State of Jharkhand and the JBVNL would bring about operational efficiencies through compulsory feeder and Distribution Transformer metering by states, consumer indexing & GIS mapping of losses, upgrade/change transformers, meters etc., smart metering of all consumers consuming above 200 units/month, and increased power supplies in areas with reduced AT&C losses. The reduction in AT&C losses itself is likely to bring additional revenues of around Rs 2000 crore to JBVNL till FY 19. Demand Side interventions in UDAY such as usage of energy- efficient LED bulbs, agricultural pumps, , fans & air-conditioners and efficient industrial equipment through PAT (Perform, Achieve, Trade) would help in reducing peak load, flatten load curve and thus help in reducing energy consumption in the State of Jharkhand.

The MOU envisages that the State of Jharkhand and the JBVNL would adhere to a designated AT&C loss trajectory to reduce the AT&C losses from the current levels of almost 40% to 15% by the year 2018-19. To this effect, the State of Jharkhand has committed to improve the Billing efficiency from 73% in FY 16 to 85% in FY 19 and Collection efficiencies from 89% in FY 16 to 100% in FY 19. Similarly, the gap between Average cost of supply (ACS) and Average revenue realization (ARR) would be reduced from Rs 3.55 per unit in FY15 to zero by the FY19. During the entirety of the reform period, the State government of Jharkhand would extend a graded Operational funding requirement (OFR) support to JBVNL during the period of reforms from Rs 2321 crore in FY16 to zero in FY19 to ensure friction-less cash flows. To ensure that various milestones and interventions proceed at the targeted pace, the MOU identifies various Officials of JBVNL who are accountable in respect to various activities envisaged in UDAY.

The people of Jharkhand would be the biggest beneficiaries of this MOU. Increased demand for power from DISCOM would mean higher PLF of generating units and therefore, lesser cost per unit of electricity thereby benefitting consumers. The scheme would allow speedy achievement of power to around 2333 Villages and 29 lakh households in Jharkhand that are still without electricity. Availability of 24 x7 power in turn, would improve quality of life for the consumers. The business and Industry in the mineral rich Jharkhand would be benefited as it would accelerate the growth process in manufacturing as well as help in agricultural and economic development of the State.

The Scheme UDAY was launched by the Government of India on 20th November, 2015 in consultation with various Stakeholders including States, DISCOMs, Banks and Financial Institutions to ensure a sustainable solution to enable the Distribution utilities across the country to break out of a long standing Debts of almost Rs 4.3 Lakh crore. The scheme would help the financially stressed DISCOMs to supply adequate power at affordable rates, enable the Governments to make efforts towards 100% Village electrification, 24X7 Power for all and supply clean energy. These interventions would help the Country in improving the quality of life of its citizens, and catalyse overall economic growth, and the removing impediments towards national priorities such as “Make in India” and “Digital India”.

The Central government would provide incentives to the DISCOMs and the State government aimed at increased Power infrastructure growth and lowering the cost of Power to the State. The state of Jharkhand would get additional/priority funding through the Central schemes such as DDUGJY, IPDS, Power Sector Development Fund or such other schemes of MOP and MNRE, if they meet the operational milestones outlined in the scheme.The state shall also be supported through additional coal at notified prices and in case of availability through higher capacity utilization, low cost power from NTPC and other CPSUs. Other benefits such as coal swapping, coal rationalization, correction in coal grade slippage, availability of 100% washed coal would help the state to further reduce the cost of Power. This alone would yield benefits to the tune of Rs146 crore. With the financial turnaround through financial and operational efficiencies, the DISCOM rating would improve, thereby reducing their cost of Borrowing for future capital investment requirement for sustainable operational improvements.

Signing of this MoU under UDAY will accelerate the process of reforms across the entire power sector and will ensure that power is accessible, affordable and available for all. In true sense the scheme would also herald the UDAY (rise), of a ‘Powerful” India.

Anand Gupta Editor - EQ Int'l Media Network


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