Impact of India’s UDAY scheme yet to be felt - Mercom

Facebook
Twitter
LinkedIn
Reddit
Email
Several states are still delaying signing PPAs. Flickr: Tapas Ganesh

India’s major package to try and turn around the finances of its distribution companies (Discoms) has yet to make a positive impact and has even worsened conditions for some companies, according to consultancy firm Mercom Capital Group.

Discom financial heath is critical for solar firms, who want a reliable off-taker, swift power purchase agreement (PPA) signing and timely payments. Strong fiscal health could also prevent Discoms from favouring thermal power and flouting solar’s must-run status.

Out of India's 29 states and seven union territories, 16 states and one union territory have voluntarily signed up to the UDAY scheme. Mercom reported that Discoms in Rajasthan, Uttar Pradesh, Uttarakhand, Jharkhand and Karnataka are still delaying PPA signing, which causes delays in project commissioning. Nevertheless, the same Discoms also said it will take some time for the positive impact of UDAY to be seen.

Indeed, research from global analysis firm CRISIL Ratings recently forecast that Discoms singed up to UDAY could see their losses more than halve from their current levels by FY2019.

However, UDAY’s impact to date, a year later since its inception, has been less clear.

An official at Rajasthan Electricity Regulatory Commission (RERC) told Mercom that the state has issued INR284.55 billion (US$4.19 billion) worth of UDAY bonds, but has not found sufficient takers. This has been detrimental to the Discoms’ situation rather than helping it. The official also said the government must enforce strict timelines and tariff hikes for UDAY to work.

His comments juxtapose those of energy and mines minister Piyush Goyal, the architect of UDAY, who claimed that Rajasthan Discoms were likely to be the first to turn around a profit in 2017. There have already been minor incidences of delayed payments to solar developers in this state.

Elsewhere, regulators in Haryana and Jharkhand also called for the government to focus on strict implementation of the policy. Mercom also said that banks and lenders have yet to see positive impacts from UDAY.

Raj Prabhu, chief executive of Mercom Capital Group, said: “With solar installations forecast to double next year, the financial health of Discoms needs to turn around sooner than later for the sector to flourish. The industry is waiting for UDAY to start making a difference.”

Read Next

September 23, 2022
India’s government has approved the second round of the production-linked incentive (PLI) scheme to incentivise domestic solar PV module manufacturing.
September 22, 2022
Tech major Amazon has expanded its renewables portfolio globally with 71 new projects with a total capacity of 2.7GW.
September 20, 2022
Private equity firm KKR and Hero Group have invested US$450 million in Indian independent power producer (IPP) Hero Future Energies (HFE) to support its renewables expansion.
September 14, 2022
Tata Power Solar Systems has received a “letter of award” of INR5.96 billion (US$75 million) from NHDC to set up a 125MWp floating PV project in India.
September 13, 2022
India-based Serentica Renewables has launched a renewables platform in India with plans to install 1.5GW of solar and wind power.
September 12, 2022
Renewables developer Amp Energy India has formed a joint venture (JV) with Websol Energy Systems Ltd. for manufacturing up to 1.2GW of monocrystalline PERC solar cells and modules in the north-western Indian state of West Bengal.

Subscribe to Newsletter

Upcoming Events

Upcoming Webinars
September 27, 2022
15:30 AEST (UTC +10)
Solar Media Events
October 4, 2022
New York, USA
On-Demand Webinars, Solar Media Events
October 11, 2022
Virtual event
Upcoming Webinars
October 18, 2022
10am (EDT) / 4pm (CEST)