Onus on states to form action plan for new discom reform scheme
Fund allocation to hinge on efficiency
The new ~3-trillion reform scheme for power distribution companies (discoms) announced in the Union Budget 2021-22 on February 1 will put the onus on states to formulate their own action plan and disburse funds accordingly.
Unlike earlier schemes, including the first discom reform of the Bharatiya Janata Party in 2014 – Ujwal Discom Assurance Yojana (UDAY) - the current one will not have a one-size-fits-all approach.
Senior government officials said a committee will be set up to evaluate the action plan drafted by states for turning around discoms and improving power supply.
“The central funds will be sanctioned and released according to the plan by states and their performance. The thrust is different – those who are efficient will get the money,” said an official.
In her Budget speech this month, Finance Minister Nirmala Sitharaman said a revamped, result-linked scheme for five years would be launched for discoms with an outlay of Rs 3 trillion.
Officials said, the scheme will strictly follow the ‘result-linked’ part, wherein fund disbursement will be a factor of improvement by discoms – financially and operationally.
State-owned discoms across the country are financially and operationally beleaguered, despite four reform schemes in the past 15 years. The earlier discom reform scheme UDAY concluded in 201920 (FY20), with most states failing to meet their stipulated targets and still in the 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 the average cost of supply-revenue realised (ACS-ARR) down to zero by FY20.
However, AT&C losses currently stand at 23.9 per cent and the costrevenue gap at 0.53 paise, according to the UDAY portal.
In the first year of the scheme, the major focus will be on strengthening power distribution infrastructure, prepaid smart metering, improvement in billing, and solarisation of agriculture feeders. The envisaged fund allocation for the first year will be close to ~1 trillion.
The highest fund allocation is for improving the power supply infrastructure. This includes automation at the discoms’ end, removal of overhead electric cables, reduction in power theft, and transmission loss.
The discoms will also have formulate a plan to segregate agriculture power supply feeders and solarise the ones supplying for irrigation. The fund allocation for all existing power sector schemes will be subsumed into one. Deen Dayal Upadhyaya Gram Jyoti Yojana for rural power reforms and the Integrated Power Development Scheme for urban areas will be a part of this new umbrella scheme. The fund allocation made to these schemes will be disbursed, according to the plan submitted by states.