Govt may announce major power distribution reform in Budget

With mounting financial losses in power distribution across the country, Finance minister Nirmala Sitharaman is likely to announce a ₹3 trillion electricity distribution reform programme in the Union Budget, Mint has reported.

This will help in cutting down losses and improve the efficiency of power distribution utilities, the paper quoted a government official.

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According to government data, the aggregate loss of discoms was ₹85,000 crore in 2018-19. India’s average aggregate technical and commercial loss is currently at 21.4%, one of the highest among the large energy consuming economies.

The Mint said the new scheme was taken up with the states during the state power and renewable energy ministers’ meeting in July.

“Funds under the scheme would be released in proportion to the achievement by the discoms against the mutually agreed targets in the action plan,” the paper quoted a government document.

The new ‘reform-linked distribution scheme’, aimed at overhauling the power distribution sector, will subsume all existing schemes into it, with the cost being shared between the Centre and states, said the paper.

The total capital outlay of the scheme is estimated at Rs 3.12 trillion, of which 60 per cent would be a Central grant, with the balance borne by states. In its initial submission to the finance ministry, the Union power ministry has asked for a Central grant of Rs 1.8 trillion with a liability period till March 2022.

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The scheme is aimed at helping power distribution companies (discoms) trim power losses to 12-15% from the present level and gradually narrow the deficit between the cost of electricity and the price at which it is supplied to ‘zero’ by March 2025.

While addressing the 93^rd annual general meeting of FICCI on December 14, Union Power Minister RK Singh voiced concern over the sustainability of state-owned loss-making discoms. “Investment will not come unless and until there is viability in the system, unless and until the people who put money are assured that power they generate and sell will be paid for. That is the basic problem of sustainability we are facing,” Singh said.