India's power distribution sector reforms: Critical review of financial and operational sustainability in the context of Ujwal discom assurance yojana

Indian power sector witnessed several reforms since 1991 and serious of reforms after the enactment of ‘The Electricity Act, 2003’. These reforms have brought significant development in the power sector. But, this has not succeeded to achieve the financial viability of the state-run power distribution utilities (DISCOMs). The power-distribution sector has been the weakest link in the entire power sector value chain. Despite several reforms in the-power distribution sector, the sustained financial losses of DISCOMs remain a significant threat to India's energy security and economic growth. In 2015, the Government of India had launched Ujwal DISCOM Assurance Yojana (UDAY), a distribution reform scheme to achieve a financial and operational turnaround of DISCOMs and to make it's business financially viable and sustainable. This paper critically reviewed the financial and operational sustainability of the Indian power distribution sector, and the impact of the UDAY Scheme implemented in four years from FY 2016–2019. This paper also analysed the impact of distribution reform policy initiatives of the Ministry of Power. This research finds that although UDAY Scheme has contributed to the partial achievement of operational parameters and takeover of DISCOM's debts by State Governments, it has not achieved the intended result of making DISCOM's business financially and commercially sustainable. The sustained financial losses of DISCOMs, revenue shortage, mounting debts, and overdue, severe liquidity crunch even after implementation of UDAY has put the power distribution sector into a financially and commercially unsustainable state. The Indian distribution-sector needs a robust reform to revive the power sector for economic growth.