Why states are finding Centre's call to power all homes by December tough

The Union government recently announced its achievement of 100 per cent electrification of all villages before schedule. However, states, especially those in the non-special category, are saddled with a bigger worry to electrify all households by December 2018 as mandated in the Centre’s Saubhagya scheme.

The country still has 31.2 million un-electrified households. Of this, the special category states (SCS) have 3.3 million households to cover while the non-special category states will have to electrify the rest. The funding requirement for SCS households is pegged at Rs 45 billion. Such states would be granted 90 per cent of the funding requirement, so they will find it easier to achieve the electrification targets.

In contrast, the non-SCS states need funds of the order of Rs 150-180 billion over the next seven months to electrify the balance households. A report by CARE Ratings points out that state discoms (distribution companies) with high outstanding UDAY (Ujjwal Discom Assurance Yojana) bonds and poor operational efficiency would find it difficult to quickly create infrastructure and ramp up transmission network for ensuring last mile connectivity.

Discoms in UP and Bihar continue to lag on operational parameters, the report by CARE Ratings says. Both Bihar and Uttar Pradesh have steep AT&C (aggregate technical & commercial) losses at 36.8 per cent and 31 per cent respectively. A high AT&C loss is a pointer to a discom’s lower collection efficiency and lesser revenues which leads to mounting losses and affects the company’s fund raising capacity. 

Uttar Pradesh along with Rajasthan account for 52.4 per cent of the UDAY bonds issued at Rs 1.21 trillion out of the total UDAY bonds issued worth Rs 2.33 trillion. Telengana, Madhya Pradesh and Odisha also have sizeable amounts of outstanding UDAY bonds. The bonds were issued to cut interest cost on the discoms while they improved their operational efficiency. For discoms with mounting losses, arranging Rs 150-180 billion is an immediate challenge unless state governments or financing agencies like Rural Electrification Corporation (REC provide for the same.

Since the introduction of the Saubhagya scheme in September 2017, 5.4 million households have been electrified. With barely 200 days left to achieve the target for electrification of balance households, almost 150,000 households need to be electrified each day. 

The Union government has allocated Rs 215.50 billion for electrification scheme. Out of the total outlay, Rs 27.5 billion is set aside for the Saubhagya scheme and the residual funds for implementing Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGY). 

State Un-electrified

households (mn)

electrified (%)
AT&C loss (%) UDAY Bonds (Rs bn)
Uttar Pradesh          13.21 55.98 30.94 495
Bihar                3.19 74.44 36.75 31.09
Odisha             3.08 63.77 Not available Non-participant
Jharkhand                2.86 47.77 36.28 61.36
Assam            2.25 56.99 20.00 Special category state
Source: UDAY.gov.in