New Delhi: The government is finally expected to earmark the outlay for the proposed national electricity fund (NEF) in the interim budget on Monday, said a power ministry official. It is also likely to raise the allocation for the power ministry in 2009-10 by as much as 35% from last year, he added.
The setting up of the NEF was announced in last year’s Budget speech by then finance minister P. Chidambaram.
While a year has passed, the fund—which aims to offer cheap loans to state electricity boards (SEBs) to help improve their finances and cut distribution losses—is yet to be set up.
“The access to the fund (NEF) will be performance-linked and it will be aimed towards (an efficient) sub-transmission and distribution system,” said the power ministry official, requesting anonymity.
Mint had reported on 31 January 2008 about the government’s plans to set up the NEF.
Most SEBs make substantial losses and are either not able to raise money or can do so only at very high rates of interest. Around 40% of the power generated in India is lost because of inefficient transmission and distribution.
“While the entire power sector has a requirement of around Rs10.31 trillion, sub-transmission and distribution systems alone have a requirement of Rs2 trillion by 2012. This fund will try to bridge the gap,” said another power ministry official who also didn’t wish to be identified.
Though the government already has in place the Accelerated Power Development and Reforms Programme (APDRP) to upgrade the distribution system, minimize transmission and distribution losses, improve metering and assign responsibility for realization of user charges, it has grossly underperformed as it has not been able to bring down the losses to 15% by the end of 2007, as originally targeted in 2000-01.
On Monday, the government is expected to announce around Rs60,00 crore for its rural electrification programme, Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) and Rs1,780 crore for the revised APDRP, for 2009-10.
The total allocation expected for the power ministry is around Rs8,200 crore, the first power ministry official said. “The major chunk of the budget allocation to the power ministry will go towards APDRP and RGGVY,” he added.
“These figures have been indicated to us as against our demand for Rs9,000 crore and Rs5,500 crore RGGVY and APDRP, respectively,” said the first official.
While the total budget allocation for the power ministry in 2008-09 was Rs6,075 crore, APDRP and RGGVY were allocated Rs800 crore and Rs5,500 crore, respectively.
RGGVY, which had a target of providing electricity to 125,000 villages and connecting 23 million below the poverty line (BPL) households across the country by 31 March, has been faltering as reported by Mint earlier. As on 15 January 2009, only 55,000 villages have been electrified and 4.5 million BPL families connected.
“Funds and policies always do not deliver the result because implementation gets tardy. The focus at times changes from achieving the laid-out objectives to fund release and disbursal,” said K. Ramanathan, distinguished fellow at The Energy and Resources Institute.