Fresh reform package for power distribution sector

| | Lucknow
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Fresh reform package for power distribution sector

Saturday, 03 July 2021 | PNS | Lucknow

|The new power sector reform package ‘Reforms-based and Results-linked, Revamped Distribution Sector Scheme' with an outlay of Rs 3 lakh crore has imposed tough conditions on power distribution companies to avail the benefits. The UP Power Corporation Limited is the monopoly power distribution utility which has consistently failed in the last 15 years to meet all parameters of performance like cutting down line losses and improving revenue recovery.

This is the second reform scheme for power distribution companies (discoms) announced by the Bharatiya Janata Party-led government, a year after the ambitious UDAY (Ujjawala Discom Assurance Yojana) scheme concluded in March 2020.  This week, the Union Cabinet Committee on Economic Affairs gave its nod to the new scheme for the revival of the power distribution sector in India.

The ‘Reforms-based and Results-linked, Revamped Distribution Sector Scheme' seeks to improve the operational efficiencies and financial sustainability of all discoms/power departments (excluding private sector discoms) by providing conditional financial assistance to discoms for strengthening of supply infrastructure.

The objective of the 3R based scheme is reduction of AT&C losses to pan-India levels of 12-15 per cent by 2024-25, reduction of gap between average cost of supply (ACS) and average revenue realised (ARR) to zero by 2024-25 and developing institutional capabilities for modern DISCOMs.

The other objectives are improvement in the quality, reliability, and affordability of power supply to consumers through a financially sustainable and operationally efficient distribution sector.

The two previous bailout packages given by the Union government –  FRP (Financial Restructuring Plan) in 2013 and UDAY in 2017 failed to bail out the UPPCL from the deep financial red. Under both packages, the state government had taken over the debt liability of over Rs 1 lakh crore enabling the power utility to make fresh borrowings from banks and financial institutions.

The assistance would be based on meeting pre-qualifying criteria as well as upon achievement of basic minimum benchmarks by the Discoms. Implementation of the scheme would be based on the action plan worked out for each state. An annual appraisal of discoms would be done to check their progress and funding would be disbursed, accordingly. Rural Electrification Corporation and Power Finance Corporation have been nominated as nodal agencies for facilitating implementation of the scheme.

State-owned discoms across the country continue to be financially and operationally beleaguered despite four reform schemes in the last 15 years. The earlier discom reform scheme UDAY concluded in March 2020, with most of the states failing to meet their stipulated targets and still in red.

As part of system strengthening, Supervisory Control and Data Acquisition (SCADA) would be set up in all urban areas and distribution management systems in urban centres. Both these systems are used for remote monitoring of demand and supply of power along with AI powered databases.

The scheme would have an outlay of Rs 3.03 lakh crore with an estimated gross budgetary support from the Union government of Rs 97,631 crore. All existing power sector reforms schemes, namely DDUGJY, IPDS, PM-KUSUM Scheme (Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan (KUSUM) would be subsumed into this umbrella programme.

However, All India Power Engineers Federation rejected the fresh reform package as “old wine in a new bottle”.  Federation’s chairman Shailendra Dubey said, “The series of  reform measures  implemented by the Central government in the last two decades have failed to produce desired results. Even after several bailout packages and annual subsidy of over Rs 35,000 crore by the state government, the accumulated losses of the UPPCL are over Rs 1 lakh crore.”

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