Indian Government Unveils Initiatives To Reduce DISCOM Losses

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The Government has undertaken several initiatives to lessen the loss of Power Distribution Companies (DISCOMs) informed Union Minister for Power and New and Renewable Energy, Shri R.K. Singh in a written reply in Rajya Sabha.

The Central Government has approved a “Revamped Distribution Sector Scheme. A Reforms based and Results linked Scheme” with the objective of improving the quality and reliability of power supply to consumers through a financially sustainable and operationally efficient distribution Sector. The Scheme aims to reduce the AT&C losses to pan-India levels of 12-15% and Average Cost of Supply (ACS) – Average Revenue Realised (ARR) gap to zero by 2024-25.

The Scheme has an outlay of Rs.3,03,758 crore. Under the scheme, eligible DISCOMs would be provided financial support for upgradation of the Distribution Infrastructure and Smart Metering Systems for the network as well as prepaid smart metering systems for consumers.

The funding against the works other than prepaid Smart Metering and System Metering would be contingent upon DISCOMs meeting the pre-qualifying criteria and achieving at least 60% marks on the result evaluation matrix formulated on the basis of action plans for loss reduction and work plans of DISCOMs agreed upon by the Government of India.

A DISCOM which is making losses will not be able to access funds under this Scheme unless it draws up a plan to reduce the losses, lists out the steps it will take to reduce such losses and the timelines thereof and get their State Government’s approval on it, and file the same with the Central Government.

Liquidity infusion scheme tied to credible action plan by States for the reduction of AT&C losses and ACS – ARR gap. Under the Scheme State Governments are required to give undertaking to liquidate the payments due to DISCOMs on account of electricity dues of Government departments/attached offices, and also to install smart prepaid or prepaid meters in Government departments/attached offices etc.

The State Governments are also required to give undertaking to clear the dues of subsidies and to put in place a system such that the bills for subsidies are raised by DISCOMs and paid upfront every quarter, notify subsidy of State Government per unit of consumption for each consumer category.

Government of India has provided additional borrowing permissions to the extent of 0.05% of the State GSDP each linked to reduction of AT&C losses and ACS-ARR gap for the year FY 2020-21.

Based on the recommendations of Fifteenth Finance Commission, Govt. of India has also decided to provide performance based additional borrowing space of 0.50% of Gross State Domestic Product (GSDP) to States on certain performance criteria in the power sector viz. AT&C loss and ACS-ARR Gap reduction against targets, Reduction in cross subsidies, Payment of Electricity bills by Government Departments/Offices/Local Bodies, Government Offices on prepaid meters, Innovation and Innovative technologies viz. Smart Grids including Smart prepaid metering, Enterprise Resource Planning (ERP), Automatic Metering Infrastructure (AMI) and such other parameters.

In addition, Corporate Governance Guidelines have also been communicated recently to States with an advice that future release of funds by PFC and REC against loans or Government schemes would be made considering the rating of DISCOMs against these guidelines.

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