A moderate approach to the discom sector might be the answer

Contact Counsellor

A moderate approach to the discom sector might be the answer

  • Various measures have been taken to bring energy sector reforms like
  • Electricity (Amendment) Bill, 2022
  • Revamped Distribution Sector Scheme (RDSS).

Financial Status of DISCOM:

  • Losses exceed Headline Number: DISCOM bear true losses of Rs 3 lakh crore while headline number is Rs 78,000 crore.
  • Poor financial status of PFC/REC: Unsustainable discom operations are financed by Power Finance Corporation/Rural Electrification Corporation (PFC/REC) which increases the burden.
  • Budgetary constraints: Ministry of Power monitors quantity targets for DISCOMs but its increasing dependence on PFC/REC compells MoP to take hard budgetary measures.
  • Steps for Financial Strengthening: Under RDSS, government has provisioned for Regular Tariff revision, smart metering and reducing AT&C losses.

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Financial regulatory reform

  • Ensure Effective Regulation: RBI regulates PFC/REC as NBFCs which isn’t effective thus, need to regulate them as PSBs.
  • Discourage freebee culture: Offering free electricity during election undermines DISCOM’s financial viability
  • Make RDSS more effective: Include institutional changes and financial performance in the RDSS scheme along with amendments to the electricity law
  • Brining transparency in DISCOM: Discom losses and debts must be reflected in state government deficits and debt.
  • Brining simplicity in power tariffs: Government needs to regulate and limit tariff schedules to not more than 5-6 rates defined for different sectors.
  • Adopting of advance technology: Smart metering and smart grid have the potential long-run payoffs for financial performance and reducing inefficiency and corruption.

Prelims Takeaway:

  • Electricity (Amendment) Bill, 2022
  • Revamped Distribution Sector Scheme (RDSS).