Power Minister Piyush Goyal expressed hope on Monday that the recent cabinet approved financial restructuring package for state electricity distribution companies (discoms) will find a "pan India" acceptance.
"The weakest link in the power value chain is distribution, wherein discoms in the country have accumulated losses of approximately Rs.3.8 lakh crore over the past few years," Goyal said while addressing an investors' meeting here.
Noting that discoms were trapped in a vicious cycle with operational losses being funded by debt, he said they were not charging fair tariff for the electricity consumed and, as a result, are unable to supply adequate power at affordable rates.
With the losses of electricity distribution companies in India touching a staggering Rs.3.8 trillion ($58 billion), the cabinet last week approved a major restructuring and revival package for the sector, with both checks and incentives, to remove what is considered the weakest link in the government's ambitious plan of power for all by 2022.
Announcing the cabinet decision to reporters, the minister said the Ujjwal Discom Assurance Yojana (Uday) package includes steps to reduce the interest burden of discoms by as much as 600 basis points, by converting 75 percent of their debt into state governments bonds.
These bonds, he added, will bear the same interest as that for government securities, plus 50 basis points.
Goyal told power ministers of states and union territories at a meeting in Kochi last week that the cabinet-approved Uday would help wipe out the accumulated losses of state electricity distribution companies (discoms) by 2019.
He also assured the state ministers that their apprehensions regarding the proposed amendments to the Electricity Act would be addressed.