38 discoms qualify for Rs 1.9 trillion under Centre's new reform scheme

The Bharatiya Janata Party (BJP) led central government’s second reform scheme to revive state-owned power distribution companies (discoms) will begin with 38 discoms that have received funding approval after meeting the qualification criteria.

State-owned discoms across the country are financially and operationally beleaguered despite four reform schemes in the past 15 years. The earlier discom reform scheme UDAY concluded in FY20 with most of the discoms failing to meet their stipulated targets and are still in the red. The fiscal weakness of the discoms is impacting the supply chain with a record Rs 1 trillion dues to the power generating companies.

Under the latest Rs 3-trillion Revamped Distribution Sector Scheme (RDSS), close to 65 per cent of the fund has been sanctioned to these discoms, said officials. These discoms are from Rajasthan, Bihar, Uttar Pradesh, Haryana, Tamil Nadu, Andhra Pradesh, Assam, Jammu & Kashmir, Madhya Pradesh, Kerala, Mizoram, Jharkhand, and Chhattisgarh. Fifty-two discoms had submitted their detailed project reports (DPRs) in December last year, after the power ministry notified the guidelines in July 2021. RDSS was announced in the Union Budget last year.

Of the Rs 1.9 trillion sanctioned, around Rs 92,000 crore is for infrastructure works for loss reduction. Close to Rs 10,000 crore is for installing smart meters. The balance amount is for several state specific projects for meeting the targets stipulated in their DPRs.

While discoms would focus on loss-reduction initiatives in the first phase, they will look at system strengthening in the second phase, said a senior official. Union Power Secretary Alok Kumar, in an interview with Business Standard earlier, had said the priority would be to reduce losses under RDSS. “We have told the states that the first tranche of 50 per cent DPR should be for load-reduction investment, such as taking up Ariel Bunch Cabling, Feeder segregation, and smart metering, etc,” Kumar had said.

However, in case of profit-making discoms such as that of Gujarat, the ministry has sanctioned funds for new initiatives such as SCADA (remote grid monitoring) and IT infrastructure, etc.

Officials said the states/discoms that have met the qualification criteria have in their ‘statement of purpose’ (SoP) committed to a trajectory of loss reduction and infrastructure creation for the same. “The pre-qualification criteria mandated these discoms to commit cost-reflective tariff, loss in technical and commercial losses, have metered connections, bridge the cost-revenue gap and bring down their dues to power-generating companies,” said the official.

The state government of the particular discom needs to bring down the dues of the state departments to discoms, bring down regulatory assets and ensure regular tariff revisions along with the state electricity regulatory commissions (SERCs).

Business Standard had earlier reported that an annual appraisal of discoms would be done to check their progress, and funding would be disbursed accordingly. Officials said if discoms fail to meet the targets, they won’t get further capital and would need to apply for the scheme once again.  Major criteria of judgement would be reduction in aggregate technical and commercial (AT&C) losses, ACS-ARR (cost-revenue) gap and regulatory assets, said officials.

“All the DPRs and the progress of the discoms would soon be uploaded on a public platform and would be updated in real time,” said a senior power ministry official.

RDSS seeks to improve the operational efficiencies and financial sustainability of all discoms/power departments (excluding private sector discoms) by providing conditional financial assistance. The scheme has an outlay of Rs 3.03 trillion with an estimated gross budgetary support from the central government of Rs 97,631 crore. All the existing power sector reforms schemes, including DDUGJY, IPDS, and PM-KUSUM — would be subsumed into this umbrella programme.

Green Signal

• Rs 3.03 trillion: Total scheme outlay

• 38: Qualified discoms

• Rs 1.9 trillion: Amount sanctioned

• Rs 10,000 crore: Amount sanctioned for smart meters

• Rs 92,000 crore: Amount sanctioned for loss reduction projects

• First phase of the scheme to focus on loss reduction

• Second phase of the scheme is for system strengthening