Power Struggle: Centre’s reform scheme is a mere bailout package for discoms

In her FY22 Budget speech, FM Nirmala Sitharaman announced that under the proposed Electricity (Amendment) Bill, 2021, the government intends to delicence the distribution business, bring in competition, and give the consumer power to choose her supplier. She also unveiled the Rs 3 lakh crore electricity distribution reform programme to reduce losses and improve the efficiency of discoms.

Tantalisingly christened ‘Reforms-Linked, Result-Based Scheme for Distribution’ (RLRBSD), the scheme is aimed at helping discoms trim their electricity 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. This is sought to be achieved by improving the reliability and quality of the power supply. It will also have a compulsory pre-paid and smart metering component to be implemented across the power supply chain, including in about 250 million households.

The Centre is expected to contribute around Rs 60,000 crore to the scheme’s corpus, and the rest may be raised from multilateral funding agencies such as ADB and World Bank (WB). The Centre’s contribution will be met through the previous commitment of the ongoing schemes, viz. the Integrated Power Development Scheme (IPDS) and the Deen Dayal Upadhyaya Gram Jyoti Yojna (DDUGJY). The funds will be released subject to discoms meeting reform-related milestones.

The aggregate technical and commercial (AT&C) losses—a jargon for power theft—and shortfall in the average revenue realisation from the sale of electricity vis-a-vis the average cost of supply (cost of purchase and distribution), or the ACS-ARR gap, are major causes for losses of discoms and their financial stress. Accordingly, the scheme sets the target for both to be achieved by 2025.

When viewed in the backdrop of UDAY, launched in November 2015, wherein the targets were missed by a huge margin, this scheme does not inspire.

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