Similar to previous Budget, clean energy transition and distribution reforms were expected in this year’s Budget for the power sector.

One of the major announcements was regarding the long-awaited renewable energy programme in Ladakh by announcing investment of ₹20,700 crore (including central support of ₹8,300 crore) for its inter-State transmission system. Apart from this, higher allocation to the scheme relating to distribution sector and financial assistance for energy storage projects were the major highlights for the sector.

Distribution allocation doubled

The Finance Ministry has doubled the allocation to the Reform Linked Distribution Scheme to about ₹12,071 crore which was in line with the Power Ministry proposal.

The scheme aims to improve the financial sustainability and operational efficiencies of discoms by reducing their Aggregate, Technical, and Commercial losses and bringing down the cost-revenue gap.

Further, States shall be allowed a fiscal deficit of 3.5 per cent of GSDP of which 0.5 per cent shall be tied to power sector reforms. This can improve the financials of distribution companies.

Ultimately, the improved financials of the discoms can further aid them in timely payment and reducing their dues to power generation companies such as NTPC, NHPC and Adani Power.

Sops for energy storage systems

Currently, the renewable energy sources such as solar and wind suffer from their intermittent nature and hence can’t assure round-the-clock supply of power.

To help mitigating the issue, viability gap funding for battery energy storage systems with 4,000 MWh capacity has been announced, while detailed framework for Pumped Storage Projects will also be formulated.

The sops are needed as it will help improve cost-competitiveness of such projects, stabilise grid and fast-track clean energy transition. Some of the power generation companies which have announced their foray into the space are JSW Energy, Tata Power and NTPC.