Innovative approach of PM Modi led to launch of UDAY scheme, says book

Prime Minister Narendra Modi's innovative approach averted a crisis in the power sector and led to the launch of transformative UDAY scheme, according to a book authored by R Balasubramaniam.

Ujwal DISCOM Assurance Yojana (UDAY) was launched in 2015 with the objective of achieving a comprehensive financial and operational revival of power distribution companies.

The book titled 'Power Within: The Leadership Legacy of Narendra Modi' among other things talks about Modi's attentiveness to varied viewpoints, insistence on innovative, out-of-the-box solutions, and creation of a conducive environment for junior officers to contribute ideas in policy making.

Balasubramaniam is a member of Capacity Building Commission, which was created in 2021 to facilitate preparation of annual capacity building plans of departments, ministries and agencies, among other things.

Quoting Finance Secretary T V Somanathan, the book said a meeting was convened by the Prime Minister's Office to deal with the precarious financial health of DISCOMs.

The meeting, which included key ministers and officials like the then power minister Piyush Goyal and finance minister Arun Jaitley, focused on the persistent challenges facing the power sector.

Somanathan attended the meeting as the then joint secretary in the Prime Minister's Office (PMO) alongside his junior colleague Brajendra Navnit and other officers.

"The prime minister attentively absorbed the power ministry's plea for a bailout akin to the 2003 initiative. The RBI advocated for the government's intervention to restructure loans and authorize increased borrowing by state governments. The power ministry accordingly proposed allowing states to take over a substantial part of the DISCOM debt by relaxing the 3 per cent fiscal deficit ceiling," the book published recently said.

The then expenditure secretary expressed concerns that such a move might only perpetuate a cycle of inefficiency unless the power sector and DISCOMs committed to substantive reforms, it said.

The prime minister, fully engaged with these discussions, recognized that inaction was not a viable option, as it could precipitate a power crisis with far-reaching implications for India's burgeoning economy and the daily lives of its citizens, it said, adding, he wanted to know how relief could be given without creating conditions for the cycle to repeat.

Faced with what appeared to be a classic case of a need for relief versus creating perverse incentives, the prime minister sought practical, innovative solutions from the team.

"In this context, Brajendra Navnit, the junior-most officer in the room, boldly proposed allowing state governments to enhance their borrowing capacity, but with a condition: in the future, if DISCOMs continued to incur losses, these losses would automatically be counted as a part of the 3 per cent fiscal deficit. This would provide short-term relief, but if states did not carry out improvements, they would face budget constraints," it said.

The book said, the suggestion of the junior-most officer was accepted and a balanced approach was agreed upon, aiming to provide financial relief to DISCOMs while maintaining fiscal discipline among states.

It showcased the prime minister's willingness to foster a collaborative and innovative problem-solving environment, and led to the launch of the transformative UDAY scheme, it added.