Electricity reforms: Errant discoms to lose PFC funding, prepaid meters to be the norm

Published: March 9, 2020 6:30:02 AM

Power minister RK Singh says a citizens’ charter to come out soon; smart, prepaid meters to be the norm

 Under the charter, electricity connection will be provided within 10 days from the date of receipt of application (discoms will have to answer for any lapse).Under the charter, electricity connection will be provided within 10 days from the date of receipt of application (discoms will have to answer for any lapse).

By Anupam Chatterjee & KG Narendranath

Stating that a lack of disincentives for non-performance was one of the drawbacks of the UDAY scheme for electricity distribution entities that ran between November 2015 and March 2019, Union power and renewable energy minister RK Singh said a new scheme in the works would lay a big emphasis on prudence. He said it would also include depriving discoms, failing to traverse a glide path for AT&C loss reduction to be agreed upon among the Centre and states, of their principal source of loan finance, namely Centre-run PFC-REC.

He further said a ‘bouquet of steps’ for loss reduction would be suggested to the discoms for them to stick to the targets, including more private participation, with the key incentive for compliance being continued, if not augmented, Central funds for systems upgrade.

A ‘citizens’ charter’ would be included in the regulatory framework, improving upon the current, laxly-implemented ‘standards of service’ outlined by state power regulators. Under the charter, electricity connection will be provided within 10 days from the date of receipt of application (discoms will have to answer for any lapse).

Also, renewal of licence for a discom will be contingent upon 100% of power supplies being tied up.

Given that inadequate and slipshod metering coupled with inefficient collection system continues to lead to costly delays in disconnecting supplies to defaulters, prepaid meters, preferably smart meters, would be promoted, Singh said.

In an interview with FE, the minister said, “Every time the Centre gives money to discoms to strengthen their systems and infrastructure, they add new equipment, but end up not maintaining the facilities, because they are making losses and are financially broke. So, under the new scheme, the incentive for discoms would be the continuation of funds from PFC-REC for systems upgrade if they agree to the loss reduction trajectory and the disincentive for not meeting loss trajectories would be curtailment of the funding sources.”

The minister said his ministry has worked out an estimate of the money needed for distribution systems upgrade under the new scheme and was discussing the availability of funds with the finance ministry.

Asked why discoms’ finances seemed to deteriorate again after a less-than-targeted degree of improvement under the UDAY scheme (UDAY-tied discoms’ financial losses dropped from nearly Rs 51,500 crore at FY16 end to a little over Rs 15,000 crore by FY18 end, but again shot up 89% to about Rs 28,400 crore by FY19 end), Singh said: “Losses did come down under UDAY. In FY19, discoms’ aggregate technical and commercial losses were a little above 18%, compared with FY17 losses of about 22%.

The problem with UDAY was that the incentives offered through the scheme were not availed by the states. If they had stuck to their loss reduction trajectories, 15% of their loans under the Deen Dayal Gram Jyoti Yojana and the Integrated Power Development Scheme (IPDS) would have been converted into grant. The two schemes have a total outlay of about Rs 88,000 crore and as much as 60% of are grant, 30% loan and 10% is the states’ contribution. Normally one would expect any reasonable entity to be keen on availing this incentive and therefore work more towards reducing losses. But that is not how state governments function. I have not come across a single state which has claimed this incentive under UDAY.”

On the plans to address the problem of power theft, the minister said the theft-prone areas would be identified and wiring in these places would be converted to aerial bunched cables. Tamper-proof high voltage distribution systems would be set up in these places.

Stressing that discoms’ losses also stemmed from non-payment of dues by the state government departments – as at end-September, 2019, unpaid dues of state government departments to discoms stood at Rs 50,000 crore –, the minister said prepaid meters would be installed in major government buildings. “(Absence of) regular payment of subsidies (by states) is another pain point. State governments announce discounted power tariff schemes for various consumer categories and according to the law, they are required to pay the power subsidies·the difference between the cost of supplies and the discounted tariffs·in advance to the discoms. This is not happening and these subsidies are either delayed or partially paid,” Singh said.

Under the UDAY scheme, 16 state governments among themselves took over Rs 2.32 lakh crore as combined debt of their discoms; this resulted in lowering of the interest rates on these loans for the discoms concerned to 7-8.5% from around 11-12% earlier.

On the vexed issue of state electricity regulators under-performing on their key task of ensuring timely and adequate tariff revisions, Singh said: “These regulators are supposed to be neutral and follow the law. But somehow they feel beholden to (the respective state governments) and are not being able to keep themselves at an arm’s length from these governments. The other major problem on this front is the multiplicity of selection committees. We had one selection committee each for state regulators, Aptel, CERC etc. We believe there should be one selection committee. We are proposing to bring an amendment to put in place one unified selection committee headed by a Supreme Court judge, two members from the Central government, and two members from the state government by rotation.”

Under the UDAY scheme, 16 state governments among themselves took over Rs 2.32 lakh crore as combined debt of their discoms; this resulted in lowering of the interest rates on these loans for the discoms concerned to 7-8.5% from around 11-12% earlier.

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