“You can’t always throw good money after bad. This time, discoms have no choice but to improve”

Most discoms are operationally inefficient and financially unhealthy

Q.We are once again hearing that the power distribution sector is being reformed. Why?

We need to change the way business is done to make the sector sustainable. The Electricity Act, 2003, was reformist legislation, but the rules and implementation didn’t achieve the desired results. The idea was to corporatise the electricity sector so that consumers pay for what they consume.

If states want to subsidise some sections, they should be free to do so. But they need to pay discoms upfront. The discoms also need to put their house in order—in many states, there are no proper records of consumption in various subsidised sectors.

Q. How will you ensure that discoms fall in line?

You can’t always throw good money after bad. Most discoms are operationally inefficient and financially unhealthy. [So, now], the Power Finance Corporation and Rural Electrification Corporation will not lend to inefficient and lossmaking discoms—if they need a loan, they will have to come up with a plan to cut losses to 12 per cent. If they deviate from that plan, the loan will be recalled. Discoms with overdue payments to gencos pending for more than 90 days will be denied access to the spot market.

Q. This requires stricter and more efficient regulators. How will you ensure this?

The Electricity Act required regulators to be independent, but the method of their appointment put them at the mercy of the state’s chief minister. We have proposed a national body on the lines of the UPSC to select a panel of regulators, from which states can choose. The national body will not only make appointments more transparent but will also ensure the states have access to a pool of talented professionals.

Q. Some state governments say the Centre is encroaching into their jurisdiction.

There is no question of getting into the state’s jurisdiction. There are misinterpretations of certain provisions, which created confusion. For example, there was a [question about] direct benefit transfers—that farmers and [those receiving subsidies] would have to pay first and be reimbursed later. I explained that this is not the case—every consumer has an account at the [relevant] discom, and states have to ensure that subsidies are paid there.

Q. Unions are also angry, saying that you are pushing privatisation.

My aim is to cut commercial losses, ensure 24x7 electricity access and improve the financial health of discoms. It is up to the states to decide what sort of ownership structure they want. We have our own PSU national distribution company (an NTPC-PowerGrid joint venture). If they want to hand over [their discoms] to this entity, they are welcome. There are also franchise models, and states can keep the existing ownership pattern, if they so wish. However, the objective should be clear—discoms must be run efficiently.