Approach for the regulatory treatment of the UDAY debt takeover

This study is a first of its kind and it reviews and analyses the impact of the regulatory treatment of the Ujwal DISCOM Assurance Yojana (UDAY) debt takeover on distribution companies (discoms) and consumers under two approaches: Approach A examines the regulatory treatment by state electricity regulatory commissions (SERCs) and Approach B looks at treatment based on financial principles. Discoms from 16 states participated in the Ujwal Discom Assurance Yojana (UDAY) scheme for their financial turnaround and operational efficiency improvement. As of 30 September 2015 (the launch date for the UDAY scheme), the total debt of the discoms of 15 states stood at INR 3.7 lakh crore, i.e.~93 per cent of the total debt of discoms in India. Under the UDAY scheme, state governments were to take on over INR 2.3 lakh crore of discoms’ debt (~75 per cent of the INR 3.7 lakh crore debt). The two approaches for regulatory adjustment provides insights for the Ministry of Power (MoP), Forum of Regulators (FoR), Appellate Tribunal for Electricity (APTEL), distribution companies (discoms), state electricity regulatory commissions (SERCs), state governments, and sectoral experts.