Cabinet approves Union Budget’s ₹97,631 crore Discom package

Our Bureau New Delhi | Updated on June 30, 2021

(From right) Union Ministers Prakash Javadekar, I&B; Ravi Shankar Prasad, IT & Law ; and R K Singh, Power at a press briefing on Cabinet & CCEA decisions in New Delhi on Wednesday   -  Kamal Narang

States will have to approve a loss-reduction action plan to avail this benefit

The Cabinet on Wednesday approved the ₹97,631-crore financial package that was announced in the Union budget to restructure State public-sector power distribution companies.

“State governments will have to approve a loss-reduction action plan for the Discoms to avail the benefits of this scheme. Discoms will have to spend the funds on low-tension lines, sub-stations, and other system improvements as per their own plan,” said the Minister of State (Independent Charge) for Power, RK Singh, at a press briefing.

“The target is to reduce the additional transmission and commercial (AT&C) losses of Discoms to 12-15 per cent from the present 21 per cent by 2024-25,” he said. The scheme also aims to reduce the gap between average revenue realisation and average cost of supply (ARR-ACS gap) to zero by 2024-25, Singh added.

Fortifying balancesheets

The scheme aims to do away with the ARR-ACS gap by linking the disbursal of funds on the condition that State governments must fortify their discoms’ balancesheets. Participating States will have to pay government electricity bills and subsidy transfers on time and, more significantly, let Discoms raise power tariffs to meet the structural gap in cost and revenue that has trapped them in a loss cycle.

Also read: Discoms' outstanding dues to gencos fall 11.2 per cent to Rs 81,628 crore in April

“It is proposed that the currently ongoing approved projects under the Schemes of IPDS, DDUGJY along with PMDP-2015 for the Union Territories of Jammu & Kashmir and Ladakh would be subsumed in this Scheme, and the savings of their gross budgetary support (approximately ₹17,000 crore) would be part of the total outlay of the Revamped Distribution Sector Scheme under the existing terms and conditions till their sunset on March 31, 2022,” the Ministry of Power said in a statement.

“The funds under these schemes would be available for the identified projects under IPDS and for the approved ongoing projects under Prime Minister’s Development Program (PMDP) for the Union Territories of J&K and Ladakh under IPDS and DDUGJY till March 31, 2023,” it added. The bundled scheme will have an outlay of ₹3,03,758 crore with an estimated gross budgetary support of ₹97,631 crore from the Central government. The scheme will run till 2025-26. Rural Electrification Corpotation and Power Finance Corporation have been nominated as nodal agencies for facilitating its implementation.

Published on June 30, 2021

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