Driving Growth: Government schemes to promote sector development

Government schemes to promote sector development

The Government of India, in view of the growing needs of the economy, is committed to providing access to electricity to all and ensuring uninterrupted power supply across the country at a reasonable price. Towards this, the government has implemented several policies and programmes over the past few years to improve the overall power supply position. Some of the key initiatives are the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for electrification of all unelectrified villages and households, the Ujwal Discom Assurance Yojana (UDAY) for the revival of financially stressed distribution companies, the Integrated Power Development Scheme (IPDS) for system strengthening, the Unnat Jyoti by Affordable LEDs for All (UJALA) for improving energy efficiency, and the National Smart Grid Mission (NSGM) to promote activities related to smart grid development. Apart from these, the government has also taken up a joint initiative with all the states and union territories (UTs) for the preparation of state-specific action plans for providing 24×7 quality power supply to all consumers by 2019, in a phased manner.

Indian Infrastructure takes a look at the achievements so far and the current status of these initiatives…


With the focus on reducing losses and improving the liquidity position of discoms, UDAY was launched by the central government in November 2015. The scheme gained the requisite momentum with 18 states agreeing to participate in it within six months of its announcement; however, not all the states  were able to join the scheme by the end of the stipulated period. Hence, the timeline for joining the scheme and the issuance of bonds under it was extended in June 2016 by one year, from the earlier deadline of March 31, 2016.

As of April 2017, 27 states have joined UDAY and signed MoUs with the Ministry of Power (MoP) for its implementation. The states and UTs that have not done so are West Bengal, Odisha, Nagaland, Delhi, Dadra & Nagar Haveli, Daman & Diu, Lakshadweep Islands, Chandigarh, and the Andaman & Nicobar Islands. Of these, Odisha has agreed in principle to join the scheme.

UDAY provides for taking over 75 per cent of the total outstanding debt of discoms by state governments and the issuance of bonds in the market or directly to the respective banks/financial institutions holding the debt. However, only 16 states (Jharkhand, Chhattisgarh, Rajasthan, Uttar Pradesh, Punjab, Bihar, Haryana, Jammu & Kashmir, Andhra Pradesh, Madhya Pradesh, Himachal Pradesh, Maharashtra, Telangana, Assam, Tamil Nadu and Meghalaya) have signed comprehensive MoUs availing of this financial support from the respective state governments. As of April 2017, total bonds worth Rs 2,325 billion have been issued by the 16 states (both states governments and discoms), accounting for over 85 per cent of the total bonds to be issued. Five states – Uttar Pradesh, Chhattisgarh, Jharkhand, Bihar, and Jammu & Kashmir – have issued bonds for the whole amount under the scheme.

Parameters such as aggregate technical and commercial (AT&C) losses and the gap between average cost of supply (ACS) and average revenue realised (ARR) have shown some improvement, but remain below the targeted levels. Based on data from 18 states, AT&C losses reduced from 23.84 per cent as of March 2016 to 22.86 per cent as of December 2016, against the target of 20.76 per cent. Similarly, the ACS-ARR gap reduced to Re 0.47 per unit from Re 0.56 per unit, while the target was Re 0.30 per unit. The top performing states so far are Gujarat, Karnataka, Maharashtra and Telangana.


The DDUGJY was announced by the government in December 2014 subsuming the Rajiv Gandhi Grameen Vidyutikaran Yojana as one of the components of the scheme on rural electrification. As of April 2015, of the 18,452 villages that were unelectrified across 19 states, 13,377 have been electrified as of April 2017, that is, 99.3 per cent of the villages across the country now have access to electricity. Further, 934 villages were observed to be uninhabited and hence only 4,141 villages are yet to be electrified. Of these, electrification is already in progress in 3,940 villages. The remaining unelectrified villages are targeted to be electrified by May 1, 2018. Himachal Pradesh and Tripura have successfully achieved 100 per cent village electrification under the scheme, while states such as Arunachal Pradesh, Assam, Jharkhand and Odisha still have a large number of unelectrified villages.

The next step in the rural electrification scheme is to provide access to electricity to all households and the government is proactively working towards this. Of about 179.66 million rural households, 133.67 million are electrified. A few states such as Gujarat, Andhra Pradesh, Punjab, Tamil Nadu and Goa have already achieved 100 per cent household electrification, while others like Bihar, Uttar Pradesh, Jharkhand and Nagaland do not even have 50 per cent of their rural households electrified. In fact, more than 90 per cent of the remaining unelectrified households (about 46 million) are located in nine states, namely, Uttar Pradesh (34 per cent), Bihar (15 per cent), Madhya Pradesh (10 per cent), Odisha (8 per cent), Jharkhand (7 per cent), Maharashtra (6 per cent), Assam (5 per cent), Rajasthan (5 per cent) and Karnataka (3 per cent).


Subsuming the Restructured Accelerated Power Development and Reforms Programme (R-APDRP) as a separate component relating to IT-enablement of the distribution segment, the IPDS was launched in November 2014 with the aim of reducing AT&C losses and providing quality power to urban areas. Under the scheme, 493 projects with an aggregate cost of Rs 257.69 billion have been approved as of April 2017. These sanctions have been made for 3,598 towns across 31 states/UTs. The aggregate grant approved by the central government for these projects amounts to Rs 160.49 billion, though only Rs 26.49 billion has been released till date.

Under Phase II of the scheme, aimed at IT-enablement, projects aggregating Rs 1.66 billion have been approved across six states (Andhra Pradesh, Chhattisgarh, Gujarat, Kerala, Telangana and Uttarakhand). Of the total project cost, Rs 1.02 billion is to be provided by the government as budgetary support. However, no grant has been released so far.

With respect to Part A of the R-APDRP (comprising IT and supervisory control and data acquisition [SCADA] projects), 1,308 towns (of the 1,405 towns sanctioned for IT applications) have achieved “go live” status. Further, 13 towns have completed the implementation of SCADA of the 72 towns for which funds have been sanctioned and 49 control centres have been commissioned across these towns. Under Part B of the R-APDRP  (related to strengthening of the distribution network), projects have been awarded for 1,217 towns and work has already been completed in 783.


The UJALA scheme was launched in January 2015 to provide LED bulbs to domestic consumers and was aimed at replacing 770 million incandescent bulbs with LED bulbs. As of May 1, 2017, the total number of LED bulbs distributed across 34 states/UTs was about 231.7 million. The resultant energy savings are estimated to be around 30 billion units per year and cost savings around Rs 120 billion. This has also helped in reducing the peak demand by around 6,000 MW and CO2 emissions by 25 million tonnes per year. As per government estimates, the e-procurement of LED bulbs through competitive bidding under the scheme has resulted in the reduction in procurement prices of LED bulbs by over 85 per cent, from Rs 310 (February 2014) to Rs 38 (August 2016). The retail price has also reduced significantly, from Rs 550 to Rs 65.


24×7 Power for All (PFA) is a joint initiative of the MoP and the state governments under which the latter have prepared comprehensive roadmaps covering all the segments of the power sector to effect a turnaround of the sector in their respective states by 2019. All the states and UTs have committed to participating in the programme. Fourteen states and UTs – Uttar Pradesh, Tamil Nadu, Puducherry, the Andaman & Nicobar Islands, West Bengal, Chandigarh, Manipur, Tripura, Mizoram, Arunachal Pradesh, Jammu & Kashmir, Delhi, Daman & Diu, and Dadra & Nagar Haveli – have joined the initiative only last year. The PFA is being supported by other government schemes such as UDAY and DDUGJY in the achievement of its objectives. In fact, the AT&C loss reduction targets of the PFA are being replaced by the more ambitious targets envisaged under UDAY.


With the objective of creating an institutional mechanism for planning, monitoring and implementing policies and programmes related to all smart grid activities, the NSGM was launched in March 2015. Currently, four smart grid projects are under implementation as part of the mission in Chandigarh, Amravati (Maharashtra), Congress Nagar (Maharashtra) and Kanpur (Uttar Pradesh). The Chandigarh and Amravati projects were approved by the Empowered Committee of the NSGM in March 2016 and the remaining two in October 2016. The total cost of these projects is estimated to be around Rs 5,770 million including support of Rs 1,730 million from the central government. Apart from the development of smart grid projects, the mission is also undertaking training and capacity building of discom officials. To this end, the NSGM, with support from the United States Agency for International Development, launched a series of training programmes in 2016.


While the implementation of the above-mentioned programmes has led to considerable improvements in the sector, the achievements have been below the targeted levels in most cases. Increased coordination and alignment of activities under various schemes could help in attaining the overall goal of providing quality power to all. Apart from effective implementation of these schemes, the government is also working on other reforms including the rationalisation of merit order despatch and the simplification of tariff categories which are expected to strengthen the sector further.