The current plan approved by the Union cabinet has a better chance of succeeding than the two previous ones as it also aims to enforce financial discipline on the states.
With interest costs comprising 10-20% of the cost of power in states, all discom turnaround plans expect banks to reduce their profits from the loans disbursed. The reduction of rates on the remaining loans will hit the interest income for power focused lenders especially public sector banks as stated above. It could cost them about eight per cent reduction in their profit for next year. Complete rework of coal linkages to reduce the mine-topower-plant distance in order to reduce transport costs will also help reduce the cost of electricity. Allowing large producers like NTPC to move coal to thermally efficient plants would be of help in this direction for all states purchasing power from NTPC. The coal quality from Coal India and the difference between supply quality and billing was always questioned by all coal purchasers, including NTPC.
Now there is a proposal to get coal quality verified from an independent party. This would force Coal India to supply the grades they are charging for, which might reduce the cost of electricity. As Open Access in distribution picks up it would help in improving efficiency and reducing ATC losses. Power producers can benefit from improved demand and cash-flows, while T&D players will gain from higher demand, provided the states undertake measures in their true spirit.
The success of the discoms’ package UDAY is also critical for India’s ambitious clean energy programme to combat climate change, revival of stranded thermal projects, the health of banks that have lent Rs 4 lakh crore to discoms and Prime Minister’s vision to supply affordable 24x7 power to all. Under the present Ujwal Bharat Yojna the government of India has integrated the approach of the three Ministries of Power, Coal and New and Renewable energy, to come together in realising the vision of 24x7 power to all.
The vision of 24x7 power constitutes of energy security, climate change, energy efficiency, smart cities and digital India under a single umbrella. In the long run, restructuring creates fiscal room for discoms to start buying power from the market as well as float bids for long term PPAs, which will be positive for power generating companies. Hope this UDAY scheme leads to a real sunrise in discom operations and enables them to come out with improvements to meet the government’s dream of uninterrupted power for all.