DISCOM DISTRESS

One of the big announcements in this year’s Union Budget was a mega reforms-based package for power distribution companies (discoms) with a corpus of over ₹3 lakh crore. Discoms are intermediaries between power plants and the household socket tasked with the job of transmitting and distributing raw electricity. They are, however, the weakest link in the power value chain due to numerous inefficiencies.

“The viability of distribution companies is a serious concern. A revamped reforms-based result-linked power distribution sector scheme will be launched with an outlay of ₹3,05,984 crore over five years,” Finance Minister Nirmala Sitharaman said in her Budget speech on February 1. “Distribution companies across the country are monopolies, either government or private. There is a need to provide choice to consumers by promoting competition… A framework will be put in place to give consumers alternatives to choose from among more than one distribution company.”

“Delhi is a prime example of how privatisation works in the sector… The biggest advantage of privatisation is it brings in greater accountability, which in turn improves efficiency”
Sanjay Banga, President, Transmission and Distribution, Tata Power

The scheme — Reforms-Linked, Result-Based Scheme for Distribution (RLRBSD) — will provide assistance to discoms for infrastructure creation, including pre-paid smart metering, feeder separation (supply of electricity to agricultural and non-agricultural consumers) separately and upgradation of systems tied to financial improvements. It targets reducing electricity supply (AT&C) losses to 12-15 per cent, and the gap between cost and revenue to zero by FY25. Unlike in the past, discoms will get their share of grant from the government at the end of the year, only if they achieve their pre-set targets for the year. It is expected to usher in long-pending reforms in a sector