Union Budget 2021: Govt proposes Rs 3.05 lakh cr scheme to revive discom, framework to choose distributors

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February 01, 2021 6:03 PM

Union Budget 2021 India: The minister also announced the proposal to launch National Hydrogen Energy Mission in the next fiscal for generating hydrogen from green power sources.

These two announcements are aimed at ensuring 24X7 Power for All as envisaged by the central government.These two announcements are aimed at ensuring 24X7 Power for All as envisaged by the central government.

Indian Union Budget 2021-22: Finance Minister Nirmala Sitharaman on Monday proposed a Rs 3.05 lakh crore scheme spread over five years to revive discoms and a framework to provide electricity consumers option to choose from service providers.

These two announcements are aimed at ensuring 24X7 Power for All as envisaged by the central government.

Last year, the government had enforced consumers rules for the power sector to ensure delivery of services.

But loss-making and cash-strapped discoms – which are mostly owned and run by state – are unable to buy sufficient power from generation firms to provide round the clock supply. Total outstanding dues of the discoms towards power generating firms stood at over Rs 1.35 lakh crore as of December 2020.

In her budget speech in the Lok Sabha Sitharaman said, “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 Rs 3,05,984 crores over 5 years”.

The minister said the scheme will provide assistance to discoms for infrastructure creation, including pre-paid smart metering and feeder separation, up-gradation of systems, etc., tied to financial improvements.

The Centre in November 2015 introduced the UDAY (Ujjwal DISCOM Assurance Yojana) scheme for the revival of the debt-laden discoms.

Under the scheme, discoms were envisaged to turn around financially within three years from signing agreements under it.

In September 2019, Power Minister R K Singh had said that the Ministry of Power was working on UDAY 2.0 scheme.

There were expectations that the scheme would be announced in the General Budget for 2020-21. But, no such schemes were announced.

Though, Sitharaman had last year in her budget speech said, “distribution sector, particularly the DISCOMS, was under financial stress. Further measures to reform DISCOMs would be taken”.

Sitharaman in the Budget 2021 said, “The 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”.

Therefore, the electricity consumers will get choice just like in telecom sector where customers can change service providers. At present, there is only one discom that can provide electricity supply to consumers in an area.

She also said that during the last six years, 139 GW of power generation capacity has been added and 2.8 crore households were provided electricity connection.

She also noted that 1.41 lakh circuit kilometres of power transmission lines were added in the last six years.

The minister also announced the proposal to launch National Hydrogen Energy Mission in the next fiscal for generating hydrogen from green power sources.

“Prime Minister, while speaking at the 3rd Re-inVest Conference in November 2020, had announced plans to launch a comprehensive National Hydrogen Energy Mission. It is now proposed to launch a Hydrogen Energy Mission in 2021-22 for generating hydrogen from green power sources,” Sitharaman said.

Indian Energy Exchange Chairman S N Goel said the proposed Rs 3 trillion distribution reform package to promote competition, consumer choice and increase penetration of automation and technology will go a long way in restoring financial viability and infusing greater efficiency in the sector.

Power Exchange India Ltd MD & CEO Prabhajit Kumar Sarkar said the Union Budget for 2021-22 has given a big push to the power sector by announcing close to Rs 3.06 lakh crore power distribution sector scheme.

It is expected to assist discoms for infrastructure creation tied to financial improvements, including prepaid smart metering, feeder separation and up-gradation of systems, he added.

Sarkar expressed that the proposed framework to give consumers more than one discom choice was a much-needed move which will help to enhance efficiency in the power distribution sector, induce fair competition and address the monopoly business of discoms.

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