Cabinet okays Rs 3 trn outlay for new power reform scheme for five years

Union govt support at Rs 97,631 cr

The Union Cabinet Committee of Economic Affairs (CCEA) gave its nod to a new scheme for revival of the power distribution sector in India. This is the second reform scheme for power distribution companies (discoms) announced by the BJP government, a year after the ambitious UDAY scheme concluded. 

It would have an outlay of Rs 3 trillion for five years to FY26 with a gross budgetary support of Rs 97,631 crore. Union finance minister Nirmala Sitharaman had announced the scheme while presenting in the Budget in February this year. Most of the targets under UDAY earlier slated to be met by 2020 have now been extended for another five years. 

The new trajectory for bringing down AT&C loss (operational losses due to inefficient power system) to 15 per cent, cost- revenue gap to be down to zero and improvement in services of the discoms is 2024-25. 

The 'Reforms-based and Results-linked, Revamped Distribution Sector Scheme' seeks to improve the operational efficiencies and financial sustainability of all discoms/power departments (excluding private sector discoms) by providing conditional financial assistance to discoms for strengthening of supply infrastructure, said the ministry of power in a statement today. 

The assistance would be based on meeting pre-qualifying criteria as well as upon achievement of basic minimum benchmarks by the discoms. Implementation of the scheme would be based on the action plan worked out for each state. An annual appraisal of discoms would be done to check their progress and funding would be disbursed, accordingly.

The scheme would have an outlay of Rs 3,03,758 crore with an estimated gross budgetary support from the Central Government of Rs 97,631 crore. All the existing power sector reforms schemes namely DDUGJY, IPDS, PM-KUSUM scheme would be subsumed into this umbrella program. 

The scheme would, therefore, entail the collective targets of all power sector schemes into one - solarising agriculture feeders, smart and pre-paid metering and modernisation of state-level transmission and distribution infrastructure. 

Smart metering would be done via public-rivate-partnership (PPP) mode. The power ministry stated, 2.5 million smart meters would be installed during the scheme time period. "Priority would be given to install prepaid smart meters in a mission mode in the first phase in all electricity divisions of 500 AMRUT cities, with AT&C losses higher than 15 per cent, all Union Territories, MSMEs and all other industrial and commercial consumers, all government offices at the block level," said the statement by the ministry. 

The scheme would also entail installation of 1 million prepaid smart meters by December 2023 in the first phase. 

Speaking about the Cabinet decision, Union minister for power, new and renewable energy R K Singh said once the feeder separation for agriculture was done, farmers would effectively be getting free power from solar run irrigation systems. "Agriculture subsidy would cease to exist in the next four to five years if the discoms are able to solarise the agriculture feeders. Farmers will get free power during the day and discoms would be able to redirect that amount of electricity to other consumers," Singh said. 

As part of system strengthening, Supervisory Control and Data Acquisition (SCADA) would be set up in all urban areas and Distribution Management Systems in 100 urban centers. Both these systems are used for remote monitoring of demand and supply of power along with AI powered databases. 

REC and PFC have been nominated as nodal agencies for facilitating implementation of the scheme.

State-owned discoms across the country continue to be financially and operationally beleaguered despite four reform schemes in the last 15 years. The earlier discom reform scheme UDAY concluded in FY20 with most of the states failing to meet their stipulated targets and still in red.