Home >Industry >Energy >Centre, states to implement direct benefit transfer scheme in power sector

New Delhi: In what may lead to a major overhaul of India’s power sector, the Union and state governments have agreed to implement the direct benefit transfer (DBT) scheme in the electricity sector for better targeting of subsidies, power minister Raj Kumar Singh said.

India has been running the world’s largest direct benefits transfer programme, resulting in savings to the government exchequer.

“There is no such thing as free electricity. Any subsidy you want to give to any category of consumers, it has to be direct benefit transfer (DBT). That is something which we have agreed. We will bring it into the law," Singh said at a press conference after a meeting of state power ministers.

Some of the schemes where DBT has been implemented for cash transfers include domestic cooking gas subsidy, scholarships, Mahatma Gandhi National Rural Employment Guarantee Scheme and pensions.

Singh has been championing DBT as a game changer for India’s electricity distribution sector which has been reeling under losses.

To make discoms more responsive, any disruption in electricity supplies post March 2019 will be penalized.

Also, the discoms won’t be allowed to recoup more than 15% of their losses through any tariff increase post March 2019.

“We will put into the law that after March 2019, if there is any gratuitous load-shedding without any reason, there will be penalties on the discoms," said Singh, who also heads the ministry of new and renewable energy.

The proposed tariff slabs rationalization and limiting cross-subsidy to 20% will usher in efficiency and help improve India’s per capita power consumption of around 1,200 kilowatt hour (kWh), which is among the lowest in the world.

“In the amendments which we are bringing, we are providing that after March 2019, the losses which can be taken into account for fixation of tariff will be the actuals capped at 15%...That means if you have a loss of more than 15%, you can’t set that off by tariff. The philosophy behind this is that the consumers should not be asked to pay for our inefficiencies," Singh added.

To improve efficiency and reduce losses, the Union and the state governments will be leveraging technology for 100% metering and doing away with any human interface in consumer facing functions such as metering, billing and collections.

“We have a vision to provide 24X7 power to all. We have a time frame for that. We have agreed that the time frame for that is March 2019. This has been under discussion for some time now. With all the states, the road map has been worked out and now we will make it a legal obligation," said Singh. These steps will require amendments in the Electricity Act of 2003.

Electricity tariff slab rationalization to make them uniform across the country will help in reduction of cross-subsidies borne by the industry, and make tariffs more competitive for businesses, thereby pushing the government’s Make in India drive.

“You can’t have Make in India succeeding if the cost of (electricity) tariff for the industry is going to be Rs8 (per unit). Your industry won’t be competitive," said Singh.

“We discussed the entire gamut of issues pertaining to the power sector. All of us believe that the power sector is crucial and critical to the development of the country...It is the basic infrastructure," Singh added.

However, the other radical change to separate the so-called carriage and content operations of existing discoms, which was earlier proposed by the United Progressive Alliance government, is still some time away. Carriage refers to the distribution aspect and content to power.

The onus is now on the states to firm up their own road maps.

The separation will allow consumers in India to buy electricity from a power company of their choice.

“It will be required to be done in stages and we will do it in consultation with the states," Singh said.

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