Modi’s ‘electrifying’ failure

Former Power Minister Piyush Goyal had this very original thought about the Ujwal DISCOM Assurance Yojana (UDAY), a scheme to reform India’s state-owned electricity distribution companies (discoms).

It’s worth reading his exact words:

Never before in the history of India has such a comprehensive power sector reform, which has the potential to completely transform the sector into a vibrant, efficient and well-oiled state machinery, been undertaken… it covers the entire value chain in the power sector from fuel, to generation, transmission, renewables, distribution and consumers. It has a very vast canvas determined through a bottom-up approach.

And what a game-changer it was. It drove state governments — that had agreed to take on some portion of discom loans — deeper into debt (here and here) and put an end to any progress the previous United Progressive Alliance (UPA) government had made.

Prime Minister Narendra Modi’s official website declared on 1 Jan 2016 that UDAY would “result in all the DISCOMs becoming profitable by 2018-19.” That would make them financially sustainable and not dependent on repeated government bailouts. Instead, discom losses climbed from ₹48,619 crore in 2015-16 to ₹61,360 crore crore in 2018-19, and could be higher in 2019-20.

The preferred measure of discom revenue leakage is “aggregate technical and commercial” (AT&C) losses. This covers losses due to technical issues, electricity theft and billing and collection shortfalls. The Modi government launched UDAY on 5 Nov 2015 with the aim of reducing AT&C losses to 15% in 2018-19. However, they only declined to 22%.

The chart below shows that AT&C losses fell seven percentage points under UPA1, six percentage points under UPA2 and less than one percentage point under the Modi government.

11wCq-losses-in-india-s-electricity-distribution.png

This poor performance was a rude surprise because the Modi government had so far proclaimed UDAY a major success on its UDAY dashboard, presenting unaudited numbers that painted a much more favourable picture (see darker line in chart above). Here’s a snapshot taken on 7 Jul 2020 at 1.10pm, still misleading away.

Screen Shot 2020-07-07 at 1.09.50 PM.png

There are many reasons for this under-performance, but the main one is that it’s very difficult to get people in India to pay for electricity.

Of course, electricity is a state subject and the discoms come under various state governments. But then so is health. And as we’ve seen with the fight against Covid-19, the central government is quick to seek credit when thalis are being bajaoed, but does a vanishing act when the going gets tough. If Modi wants credit for every little thing that goes well, he shouldn’t beat a retreat when schemes go badly.

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