India has made great strides in power generation and coverage over the years, but what remains unchanged is the huge loss of power distribution companies, or discoms, as they are commonly called. Legacy issues and stalling of technological up-gradation have ensured that discom companies, most of which are run by state governments, have failed to turn a profit despite the efforts of successive governments at the Centre. With renewable energy, India is poised to take a leap into the future of energy generation, which only makes it more important that the issues of discoms are addressed first. The Center has now approved a package of Rs 3 lakh crore to pull the discoms to a stronger financial footing. Here’s what you need to know.
What package has the Union Cabinet approved?
Union Finance Minister Nirmala Sitharaman in her budget speech in February this year had announced a reforms-based, result-linked power distribution sector scheme. It had said that the scheme would provide support to discoms to build infrastructure, but would be extended based on actions taken by companies to improve their finances.
As the Cabinet Committee on Economic Affairs (CCEA) gave its approval to the scheme this week, it was told that it has a period of five years and will provide funds to discoms for setting up of 250 million smart meters, 10,000, among other things. Will provide Feeder, 4 lakh km of low tension overhead line.
Reports said that to take advantage of the scheme, states have to show that they have fulfilled certain pre-conditions, such as publication of audited financial reports, state government dues and subsidies to discoms and additional regulatory assets. Do not build
In addition, the Center said that three programs for the power sector — Integrated Bijli Vikas Yojana, Deen Dayal Upadhyaya Gram Jyoti Yojana, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana, or Saubhagya — will now be merged.
What’s wrong with discoms?
In his budget speech, the Finance Minister had mentioned that in the last six years, the power sector has seen “many reforms and achievements”. Notable of these was the addition of 139 GW of installed capacity, while 28 million new domestic connections were installed as well as 1.41 lakh circuit kilometers of transmission lines. India now ranks third in the world in terms of electricity generation and consumption.
But the functioning of discoms remains a worrying issue. According to a study by the Institute for Energy Economics and Financial Analysis (IEEFA) last year, “Sick state-owned power discoms continue to disrupt.
efficient functioning of the generation and transmission sectors”, the latter two being the other components of the country’s power sector. As of May 2020, discoms have about $16 billion in debt As for the power generators that they had not yet been cleaned.
There are many reasons for the rut in which discoms are stuck. First, there is the question of low tariffs. A PRS Legislative Research Study had noted in 2014 that “supplying power at tariffs below the cost of supply, delays in tariff revision have resulted in huge financial loss to the discoms”.
Where do discoms lose money?
But the major factor hindering performance and profitability of discoms is AT&C loss or total technical and commercial loss. Technical losses represent the power that is wasted during transmission and distribution with theft, while commercial losses include inefficient billing and collection and failure to receive revenue due to payment defaults.
Simply put, AT&C losses are the percentage of electricity for which a discom did not receive any payment. While AT&C losses have decreased, they still rank fifth nationally. Compare this with countries like the UK and the US, where AT&C’s losses are 6-7 per cent.
In his budget speech, the finance minister had also talked about the monopoly of discoms across the country and proposed that a competitive framework be created that would allow consumers to choose the discoms from which they want to buy power.
The role of “unstable cross-subsidies, economically inefficient tariff setting procedures, costly thermal power purchase agreements (PPAs), and lack of modern technology and infrastructure development” as factors driving discoms’ losses in the IEEFA study was also mentioned.
Also, during the lockdown, discoms have faced suspension of manufacturing and commercial activity.
How will the new scheme help? Where do states come?
With AT&C losses being a focus area for any effort to reduce the losses of discoms, smart metering has been promoted as a major solution. According to Energy Efficiency Services Limited (EESL), which is implementing the Smart Meter National Program (SMNP) to replace 250 million conventional meters with smart meters, there are gains in billing efficiency and AT&C losses from the initiative. has decreased. . The installation of just 11 lakh smart meters resulted in “an increase of Rs 264 crore in total revenue annually, as per a report. advocacy group Coalition for an Energy Efficient Economy (AEEE).
Ending the monopoly of power distribution companies is also seen as an important and necessary change to eliminate losses and empower the consumers. Experts say that “licensing the power distribution sector to break the existing monopoly… will encourage retail competition”. It could have the same, far-reaching effect as the end of the state monopoly for the telecom sector.
But ending state monopoly is easier said than done. Electricity is a concurrent subject, which means that state governments can frame their own rules and mechanisms to govern the generation, purchase and sale of electricity. In fact, UDAY, or the Ujjwal Discom Assurance Scheme, which the Center called in 2015 for “financial transformation, operational reform,
Reduction in the cost of power generation, etc. is a voluntary scheme and the state governments can decide against joining it. However, except Delhi, West Bengal and Odisha, all states and union territories are part of the scheme.
Experts say that some states have private electricity distributors, but state governments may be reluctant to transfer distribution to private companies.
read all Breaking Newshandjob today’s fresh news and coronavirus news Here
.