The ministry of power plans to approach the Cabinet to incorporate private power distribution companies (discoms) in the Ujwal Discoms Assurance Yojana (UDAY) scheme.

Total 10 states under UDAY reforms, eight more to join soon.

UDAY is the restructuring plan of the NDA government to bailout the financially and operationally beleaguered state-owned power utilities. One of the first steps enlisted in the MoU (memorandum of understanding) is the takeover of 75 per cent of discom’s cumulative debt — 50 per cent by March 2016 and the balance by next year. States would issue non-SLR (statutory liquidity ratio) SDLs (state development loans) against the debt at prevailing market rates. The balance 25 per cent would be issued as sovereign-backed bonds by discoms.

The second part of the scheme envisages a slew of measures to improve operational efficiency, with major target being reducing AT&C (aggregate technical and commercial) losses from current levels to 15 per cent by 2019. Improving collection and billing efficiency, considerably reducing energy theft, reducing gap between ACS and ARR of discoms are also part of the targets. The scheme underlines the need of regular rate revision and keeping power affordable. Once signed, the states will also enjoy rationalised coal supply and central finance assistance.

So far, 10 states have joined UDAY and eight have issued bonds worth Rs 1.11 lakh crore during the last financial year.

The Delhi government has a joint venture with Tata Power and Reliance Infra-promoted BRPL and BYPL. Similarly, Kolkata has CESC as the discom in urban areas. Odisha, which tried privatising its three state-owned power discoms cancelled the licence of Reliance Infra last year because of the latter’s failure to bring in performance viability in 15 years of operations.

Tata Power Delhi Distribution and Reliance Infra-promoted BSES wrote to the Centre regarding participation in UDAY last year.

There are also certain cities which have private distribution as a franchisee model. Some of these cities are Agra (Uttar Pradesh), Bhiwandi (Maharashtra), Ahmedabad, Gandhinagar and Surat (Gujarat). Torrent Power runs the franchise in all these cities. Kanpur, one of the largest industrial cities in UP, tried hands at private franchise with Torrent Power but the agreement fell through.

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