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Ujwal DICOM Assurance Yojana, popularly known as UDAY Scheme, was launched by the Ministry of Power in the year 2015. The scheme aims to provide financial and operational profitability to the state owned power distribution companies (DISCOMs).

DISCOMS are the units that are charged with the responsibility of purchasing power from the power generation companies and selling it to the ultimate consumers. The primary reason for the failure of these DISCOMs to achieve financial profitability is their failure to collect the total cost of the power purchased from the power generation companies while selling them to the final consumers.

Another important purpose of the scheme was to achieve uninterrupted and affordable power supply in every corner of the country. The scheme was envisioned keeping in mind the various needs of the citizens of the country when it comes to power generation and supply. Bearing this mind, the scheme has set some objectives that it aims to achieve under this scheme.

Objectives of the Ujwal DISCOM Assurance Yojana

The objectives of the scheme are mentioned below

  • Reducing the power generation cost 
  • Helping the State DISCOMs achieve financial turnaround, i.e. sustenance and eventual profitability
  • Improving the operations of the State DISCOMS
  • Striving to achieve energy efficiency
  • Introducing measures for energy conservation
  • Identifying and developing renewable energy resources

Features of the Ujwal DISCOM Assurance Yojana

The features of the scheme that will enable it in achieving the ultimate goal of financial turnaround for these DISCOMS are mentioned below.

  • The scheme provides that the States will be taking over 75% of the total debt of the DISCOMS as on 30th September, 2015.
  • 50% of this debt will be taken in Financial Year 2015-16 and the balance 25% will be taken in the following financial year 2016-17.
  • The states will take these debts and issue non-SLR including SDL Bonds to eligible DISCOMs.
  • The proceeds to such DISCOMS will be transferred in the form of grants, loans and equity.
  • The maturity period of these bonds issued will be for a period of 10 years to 15 years and the moratorium period will be for a period of 5 years.
  • The rate of interest on such bonds will be 0.5% spread in addition to the rate of government securities. The non-SLR will have an additional 0.25% spread.
  • Another important point to remember is that the borrowing cannot be included to calculate the state’s fiscal deficit.
  • he balance 25% of the total debt of the DISCOMs will be retained by them in either of the following manner
    • Issued in the form of State backed DISCOM Bonds
    • Re-priced by the Banks or the Financial Institutions with an interest rate that cannot exceed the bank base rate + 0.10%
  • The states will take over the future losses of the DISCOMS to achieve financial turnaround. Such takeover will be in a graded fashion in the following manner
    • 0% of loss in FY 14-15 and FY 15-16
    • 5% loss in FY 16-17
    • 10% in FY 17-18
    • 25% in FY 18-19
    • 50% in FY 19-20
  • The remaining losses will be funded by means of State Bonds or DISCOM Bonds that will be backed by the State Governments via a guarantee. Such guarantee will be to the extent of the loss curve or trail that will be determined by the Ministry of Power.
  • Jammu & Kashmir and Jharkhand will be provided a special consideration to clear the outstanding Community and Public Sector Union (CPSU) dues.

Benefits of the Ujwal DISCOM Assurance Yojana

The scheme was a much needed relief to the State DISCOMs. Many states that implemented the scheme showed reduction in losses or have even gained profits in the year 2019. The various positives or benefits of the scheme are mentioned below.

  • The scheme has resulted in reducing the power cost with the help of the central support.
  • The scheme has also led to the completion of the Interstate transmission Lines at a faster pace.
  • Another benefit  of the scheme is the fair, transparent and aggressive bidding for the purchase of power.
  • The scheme has also resulted in amplifying the supply of domestic coal.
  • Reduction in coal prices.
  • Coal linkages will be allotted at notified or declared prices.
  • The scheme will also permit the coal linkage and allow the coal swaps.
  • Additional coal will be available at the declared prices.
  • The scheme will also permit supply of washed and crushed coal.
  • The scheme will also enable procurement of additional funding by means of other schemes like Integrated Power Development Scheme (IPDS), Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), etc.

Targets Set Under Ujwal DISCOM Assurance Yojana

The scheme has laid out certain targets that have to be achieved by the set dates. Achieving these targets will determine the success of the scheme as well as boost the spirit of the personnel working towards its success. Following are the targets set under the scheme.

ActivityExpected date for achievement

Feeder Metering

30 June 2016

DT Metering

30 June 2017

Consumer indexing & GIS Mapping

30 Sept 2018

Upgradation of DT, Meters etc

31 Dec 2017

Smart meter for consumers

greater than 500 Unit by Dec 17; greater than200 unit by Dec 2019

AT&C losses

15% by FY 2019

Elimination ACS-ARR gap

FY 2019

Impact of Ujwal DISCOM Assurance Yojana

The scheme has had many positive impacts since its launch in achieving its objects. Some examples of such impact or influence of the scheme are mentioned below.

  • Development and growth of Renewable Energy Sector
  • DISCOMS will better financial and operational stability
  • Improvement in PLF of Generating Plants
  • Addition in the power demand
  • Accessibility of cheaper funds
  • Addition in the capital intensive investment
  • Decrease in the amount of stressed assets

FAQs on Ujwal DISCOM Assurance Yojana

1. When was the Ujwal DISCOM Assurance Yojana initiated?

Ujwal DISCOM Assurance Scheme was initiated in the year 2015 by the ministry of power.

2. What is the percentage of debt to be retained by the DISCOMS?

As per the scheme guidelines, the DISCOMs are required to retain 25% of the total debt in the form of either State backed DISCOM Bonds or to be re-priced by the Banks or the Financial Institutions with an interest rate that is less than the bank base rate + 0.10%.

3. What is the full form of UDAY Scheme?

The full form of UDAY Scheme is Ujwal DISCOM Assurance Yojana.

4. What was the main purpose of launching this scheme?

The main purpose of launching this scheme is to achieve financial and operational soundness or stability of the State DISCOMs or power distribution companies, reduction in the power generation cost, achieving energy efficiency and conservation and to develop alternate sources of energy like renewable energy.

5. What are some of the common problems faced by the State DISCOMS?

Some of the common problems or challenges faced by the state DISCOMs are the loss of power due to theft, faulty meters, loss of power in transmission and distribution system, huge gap or difference between the average per-unit cost of supply (ACS) and average revenue that is realized (ARR), lack of political willingness to overcome the commercial losses, etc.

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