Power play: Stage set for more private funds in power distribution business

Leading private power companies have pledged interest in state-run distribution entities (discoms), which could come their way under a new government policy, but added a few caveats: payment guarantee in terms of timely release of government subsidies and receipt of dues from public sector entities, performance incentives and long-term contracts that gel with the long-gestation nature of the power distribution business.

The government is framing a new scheme for discoms to finance infrastructure upgrade.

According to this scheme, discoms with more than 18% aggregate technical and commercial (AT&C) losses will have to involve private players in their operations.
State government owning the discoms can choose between allowing full freedom to private players to run discoms under appropriate public private partnership model, or issue franchisee licences to non-government entities to execute specific, segregated operations.

As reported by FE earlier, the UDAY scheme launched in November 2015 resulted in a blip in their performance but the improvement proved to be short-lived and behind targets. Financial losses of state-run discoms rose 89% on year to Rs28,369 crore in FY19. In addition, these discoms’ outstanding dues to power generation companies jumped 50% to Rs88,600 crore on year as at December-end 2019.

Also, the AT&C losses of the discoms stood at 21.3% in September, 2019, while the target was to reduce these to 15% by March 2019.

Financial Express
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