Policy

Budget may introduce next leg of Discom reforms

Our Bureau New Delhi | Updated on February 01, 2020

The expansion in power generation sector stood at 7.4 per cent compared to 4.2 per cent in the year-ago month   -  THE HINDU

Centre will help Discoms trim losses if they adhere to ‘trajectories’, says Power Minister RK Singh

The Centre’s second leg of power distribution company (Discom) debt and loss reduction reforms may feature in the upcoming Budget, according to Minister of State (Independent Charge) for Power and Renewable Energy, RK Singh.

In response to a query on what can be expected in the Budget for the power sector, he said: “We are addressing the requirements of power distribution companies...to ensure 24x7 supply. We are providing an assistance scheme for the reduction of losses. This assistance will be in terms of technology and modern equipment to help address the losses. Now, there will be only one scheme for the Ministry of Power, which will include elements of earlier schemes.”

“The scheme has a condition that the Discom must work out a trajectory for loss reduction and adhere to it. Funds under that scheme will be released only if the trajectory is adhered to,” he added. He was speaking on the sidelines of Power Finance Corporation’s (PFC) listing ceremony of $750 million in foreign currency bonds on the NSE.

Prudential norms

“We are also tightening the prudential norms of Power Finance Corporation and Rural Electrification Corporation (REC). These prudential norms will provide that if you are making losses and have not worked out a trajectory or methodology for loss reduction, then you are not a good credit risk, so we will not be able to finance (you). So financing for PFC and REC will be predicated on the Discom reducing the losses,” said Singh.

In an interview with BusinessLine, Singh had earlier said that the next leg of power distribution reforms will be led by the Ujwal Discom Assurance Yojana (UDAY) 2.0 and a tariff policy that aims to rein in errant Discoms. Unlike its predecessor, UDAY 2.0 will be stricter with budgetary allocation to incentivise Discoms.

Combining schemes

Singh had said the new scheme would combine UDAY with development funds for strengthening the power distribution system. Once combined, the infusion of funds would be linked to the achievement of milestones under UDAY 2.0.

This was envisaged in UDAY 1.0, too. There were specific conditions under which the Discom would have access to funds. However, they were not implemented because there were multiple schemes.

Published on January 27, 2020

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