Budget 2019: UDAY to be reviewed, new power tariff reforms on anvil

The National Democratic Alliance government’s scheme for turning around the power distribution sector, Ujwal Discom Assurance Yojana (UDAY), will now be reviewed, Finance Minister Niramala Sitharaman said on Friday. “The government is examining the performance of the scheme and it will be further improved,” she said during her Budget speech.

In the past one year, the success rate of UDAY was being debated by several agencies. When UDAY was launched in 2015, the distribution companies cleared their debt through bond issuance against them, but they are back at making losses now. The operational targets of reducing power supply loss and improving efficiency is still a work in progress.

This is the first time in years that a finance minister has announced several reforms to reduce consumer electricity tariff and boost supply in the Budget speech. A package of power sector tariff and structural reforms would soon be announced, said Sitharaman.

“We will work with the state governments to remove barriers like cross-subsidy surcharges, undesirable duties on open access sales or captive generation for industrial and other bulk power consumers. Besides these structural reforms, considerable reforms are needed in tariff policy,” she said.

Surcharges and additional duties on electricity are levied by states for their industrial and commercial consumers to subsidise a section of their population. In 2017, the cross-subsidy charges were increased in the range of 60 per cent and 300 per cent across several states.

Several power tariff reforms, such as reducing number of tariff slabs, introduction of direct benefit transfer of subsidy in place of subsidised electricity and new initiatives of content-carriage separation and time-of-the-day tariff, are also awaiting implementation.