Specific Suggestions To Tighten Up The Operational Performance Clause In Uday

It is time to think of a new incentive mechanism “with teeth” for the UDAY Scheme, that would need to accompany any upfront financial assistance from UDAY to support AT&C loss reduction trajectories.

- Mohua Mukherjee

These teeth would have to make the discom temporarily give up something which everyone in the state’s stakeholder groups holds dear, and then the discom (with tacit support of other stakeholders) would earn it back gradually through “good performance”, as desired results are achieved with the help of centrally provided funds. One idea, simply for illustrative purposes, could look as follows: Assume there is an UDAY 2.0 state-discom which takes a hefty advance of central funds for investing in its distribution network to reduce AT&C losses on a fast trajectory, (just like erstwhile distribution franchisees and private discoms did, but they used their own money).

This discom could be asked to temporarily park e.g. 75% of its notional shares as collateral into an escrow account with a public-sector bank or in a trust held by a reputed law firm. However, all its operations would continue as before, on the ground.

As AT&C losses come down over time (this must be verified independently, and compared to a baseline that is also constructed independently), the discom’s shares are progressively restored to control of the discom, with all shares being returned by the time AT&C losses reach their target value, once independently certified.