Budget proposal puts onus on states to fund, get discoms back in shape

Topics Budget 2021 | Discoms | Power Sector

State-owned discoms across the country are beleaguered despite four reform schemes in 15 years | Representational image
The Union Budget's Rs 3 trillion scheme for power distribution companies puts the onus on states to plan and fund disbursement, marking a change in ‘one-shoe-fits-all’ approach as seen in the NDA government's first reform in 2014 called UDAY. 

Senior civil servants said a committee will be set up which will evaluate the action plan drafted by states for turning around their discoms and improving power supply. “The Central funds would be sanctioned and released according to the plan by the states and their performance. Now the thrust is different from earlier – those who are efficient will get the money,” said a government official.

The Budget offered a second chance to support an ailing state-owned discom with Finance Minister Nirmala Sitharaman announcing a Rs 3,05,982 crore outlay. Sitharaman said a revamped, result-linked scheme for five years would be launched for the discoms.

Officials said as the name suggests, the scheme will strictly follow the “result-linked” part wherein fund disbursement would be a factor of improvement by discoms – financially and operationally.

State-owned discoms across the country are beleaguered despite four reform schemes in 15 years. UDAY concluded in FY20 with most of the states failing to meet their stipulated targets and still in red.

The Aggregate Technical & Commercial (AT&C) losses or power supply losses due to inefficient systems were supposed to come down to 15 per cent and average cost-revenue (ACS-ARR) gap of discoms, down to zero by FY20. However, AT&C losses currently stand at 23.9 per cent and cost-revenue gap at 0.53 paisa, according to the UDAY portal. The numbers are the national average of last available data of all discoms of FY20 and indicative data of six states during Q1FY21.

In the first year of the scheme, the major focus would be on strengthening of power distribution infrastructure, prepaid smart metering, improvement in billing and solarisation of agriculture feeders. The envisaged fund allocation for the first year would be close to Rs 1 trillion.

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The highest fund allocation is for the improving power supply infrastructure which includes automation at the discoms’ end, removal of overhead electric cables, reduction in power theft and transmission loss.

The discoms would also have formulate plan to segregate agriculture power supply feeders and solarise the ones supplying for irrigation. Originally under the KUSUM scheme for solarising agriculture, the Centre is looking to make it part of the reforms package.

The fund allocation for the all existing power sector schemes would be subsumed into one. DDUGJY for rural power reforms and IPDS for urban areas would be part of this new umbrella scheme. The fund allocation made to these schemes would be disbursed according to the plan submitted by the states.

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