To meet the twin goals of curbing wasteful electricity consumption and limiting power subsidies to the really needy, the government is looking at replicating the direct benefit transfer (DBT) scheme in the sector.
To meet the twin goals of curbing wasteful electricity consumption and limiting power subsidies to the really needy, the government is looking at replicating the direct benefit transfer (DBT) scheme in the sector. While a clutch of pilot projects for DBT-Power is set to be launched soon, Union power secretary Ajay Kumar Bhalla told FE that improving electricity metering was a prerequisite for the success of the scheme. DBT-Power, if implemented efficiently, could practically solve sticky issues in the power sector as it will help slash the losses of the power distribution companies. By staying out of the subsidy loop, discoms would be able to recover the full price of electricity, in turn improving their liquidity profile. “The government is meticulously looking at several means to put the scheme (DBT-Power) into action so that the benefits reach only the intended beneficiaries,” Bhalla added. The DBT scheme on LPG subsidy has helped the government save thousands of crores and similar initiatives are being planned to cut the subsidy expenditure on PDS foodgrains, kerosene and fertilisers, with pilot projects under way.
While subsidies are routed through the discoms, most state governments delay the release of cash, affecting the formers’ liquidity. For example, out of the estimated subsidy requirement of Rs 48,181 crore in FY15, discoms received Rs 46,112 crore. Subsidy booked by the utilities increased from 11.22% of their revenue from electricity sale in FY14 to 13.05% in FY15. Figures for the subsequent periods are not available yet.
The draft national energy policy, published by NITI Aayog last month, had noted that adoption of DBT would protect the vulnerable electricity customer from rise in electricity prices when fuel costs go up. Once DBT-Power is introduced, state governments can directly subsidise customers. This will also engender salutary behavioural changes in consumption. Even the subsidised power users will be paying tariffs calculated on the basis of actual cost of electricity generation and transmission and distribution while receiving the subsidy amounts in their bank accounts.
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DBT is also expected to gradually reduce cross-subsidisation, helping to moderate industrial power rates — another issue the government is trying to address. Industrial customers, to compensate for low agricultural power prices, pay hefty tariffs of more than Rs 7.40 per unit. This is higher than several countries with per-capita GDPs comparable to India, and even more than some nations with higher income levels.