Previous Year Question
Which one of the following is a purpose of the ‘UDAY’ scheme of the Government of India?
Providing technical and financial assistance to start-up entrepreneurs in the field of renewable sources of energy
Providing electricity to every household in the country by 2018
Replacing coal-based power plants with natural-gas, nuclear, solar, wind and tidal power plants over a period of time
Providing for the financial turnaround and revival of power distribution companies
Correct Answer: D
Detailed Solution
UDAY stands for Ujwal DISCOM Assurance Yojana. The Government of India launched it in November 2015 to improve the financial and operational position of state-owned power distribution companies or DISCOMs. Therefore, option (d) is correct.
DISCOMs undertake the final supply of electricity to consumers, but several state DISCOMs were facing problems such as:
Heavy debt and interest burden.
Aggregate Technical and Commercial (AT&C) losses.
High cost of power purchase.
A gap between the average cost of supply and average revenue realised.
Delays in revising electricity tariffs.
Low billing and collection efficiency.
Under UDAY, participating State Governments were required to take over 75% of the DISCOM debt outstanding as of 30 September 2015:
50% of the debt was to be taken over in 2015-16.
The remaining 25% was to be taken over in 2016-17.
States could issue UDAY Bonds to finance the debt taken over.
The remaining 25% could be converted by banks and financial institutions into lower-interest loans or bonds.
The scheme had four principal components:
Improving the operational efficiency of DISCOMs.
Reducing the cost of power generation and purchase.
Reducing the interest cost of DISCOMs.
Enforcing financial discipline through agreements with State Governments.
The scheme aimed to bring AT&C losses down to approximately 15% and eliminate the gap between the average cost of supply and average revenue realised.
Option (a) concerns renewable-energy start-ups, option (b) concerns universal household electrification and option (c) concerns replacement of power-generation sources; these were not the principal purpose of UDAY.
Current status (2026)
The original reform period of UDAY has concluded, and it is no longer the principal new funding scheme for electricity-distribution reforms. The Union Government subsequently introduced the Revamped Distribution Sector Scheme (RDSS).
RDSS was approved in 2021 with a total outlay of approximately ₹3,03,758 crore and estimated gross budgetary support of approximately ₹97,631 crore from the Central Government. It focuses on:
Prepaid smart metering.
Modernisation of distribution infrastructure.
Reduction of AT&C losses.
Operational efficiency and financial sustainability of DISCOMs.
Improvement in the reliability and quality of electricity supply.
Thus, UDAY should not be confused with the present RDSS framework.