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India gets 3.05 trillion power discom reform scheme

In January 2014, the Aam Aadmi Party-led Delhi government ordered the audit of the three discoms—BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd and Tata Power Delhi Distribution Ltd by the CAG. Photo: Mint Premium
In January 2014, the Aam Aadmi Party-led Delhi government ordered the audit of the three discoms—BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd and Tata Power Delhi Distribution Ltd by the CAG. Photo: Mint

The new scheme will subsume programmes such as the Integrated Power Development Scheme and the Deen Dayal Upadhyaya Gram Jyoti Yojana, and funds will be released to discoms subject to them meeting reform-related milestones

Finance minister Nirmala Sitharaman on Monday announced a 3.05 trillion electricity distribution reform programme in the Union budget to help reduce losses and improve the efficiency of electricity distribution companies (discoms).

While presenting her third Union Budget she also announced putting a framework in place for allowing a choice of electricity supplier to the consumers. The ongoing Parliament session will consider the Electricity (Amendment) Bill, 2021, that has proposed amendments including measures such as “de-licensing" of the power distribution business to bring in competition.

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“The viability of distribution companies is a serious concern. A revamped reforms-based result-linked power distribution sector scheme will be launched with an outlay of 3,05,984 crores over 5 years. The scheme will provide assistance to discoms for infrastructure creation including pre-paid smart metering and feeder separation, upgradation of systems, etc., tied to financial improvements," she said.

Mint reported about the proposed scheme on 16 December, wherein the government is expected to contribute around 60,000 crore of the scheme’s corpus, and the rest will be raised from multilateral funding agencies such as the Asian Development Bank (ADB) and the World Bank. There is a compulsory prepaid and smart metering component to be implemented across the power distribution chain, including in about 250 million households.

Finance minister also made a budgetary allocation of 15,322 crore for the Union power ministry for the next financial year, which is 3.48% lower than the 15,874.82 crore allocated in the current financial year. Mint reported on 28 January about the proposed allocation, with the highest allocation expected for schemes such as the Integrated Power Development Scheme (IPDS), aimed at ensuring round-the-clock electricity supply, and the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY) to provide electricity in rural areas. IPDS and DDUGJY have been allocated 5,300 crore and 3,600 crore, respectively.

“The distribution companies (discoms) across the country are monopolies, either government or private. There is a need to provide choice to consumers by promoting competition. A framework will be put in place to give consumers alternatives to choose from among more than one distribution company," Sitharaman said while presenting her third Union budget at a time when India’s electricity demand recorded a new high of 189.6 gigawatts (GW) on Saturday. This allocation assumes importance given the government’s plan to provide round-the-clock power supply to consumers and even framing their rights, thereby guaranteeing reliable power supply across the country

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