Policy & Govt

Powering reforms: Bringing power PSUs under competitive bidding will help in tariff reduction

The power sector has to be measured in terms of 5 ‘A’s—awareness, accessibility, availability, affordability and acceptability. Recent policy measures of the government have remarkably improved the first 3 ‘A’s, i.e., awareness, accessibility and availability, especially the “Saubhagya” scheme. However, it has also brought unintended outcomes for the distribution companies as the cost of supply has increased due to increase in LT distribution network length necessitating more conductors, meters, transformers, etc. Most of the newly-added consumers are from rural areas of low-income states like UP and Bihar. They belong to subsidised consumer categories, viz. agriculture, rural-domestic, etc. Thus, the subsidy burden of respective state governments has increased.

There is a limit to which the states can meet subsidy obligations for low-income consumers. The state’s capacity to service power subsidy of its BPL consumers is dependent on its per capita income which varies from state to state.

financial express
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