Home/ Budget / Budget Expectations/  Budget to double discom reform outlay to 15,000 crore

NEW DELHI : The Centre is likely to double the allocation for the revamped distribution sector scheme (RDSS) to around 15,000 crore in the union budget for 2023-24 from 7,565.59 crore in the current fiscal year, as it seeks to streamline and modernize the power distribution sector, two officials aware of the matter said.

The increase in budgetary allocation is aimed at reducing aggregate technical and commercial (AT&C) losses, and the gap between average cost of supply per unit of power and the average revenue realized per unit by increasing the efficiency of the distribution sector.

“There are major plans for revamping the distribution sector and we need to significantly lower our AT&C losses. These would require major fund flow and allocation for RDSS may nearly be doubled," said one of the officials, seeking anonymity.

In FY22, AT&C losses of power discoms was at 17%. The government aims to bring it down to 12-15% by 2024-25. AT&C losses have come down to 17% in 2021-22 from 21% in FY21, and the gap between the average cost of supply and the average realizable revenue fell from 0.69 per kilowatthour (kWh) in FY21 to 0.22 a kWh in FY22. Under RDSS, the Centre aims to bring it down to zero by FY25.

Queries emailed to the ministries of power and finance did not elicit any response till press time.

The scheme is aimed at helping discoms improve operational efficiencies and financial sustainability by providing result-linked funding to discoms and strengthen supply infrastructure on meeting certain pre-qualifying criteria and achieving minimum benchmarks.

The five-year scheme has an outlay of 3.03 trillion, from FY22 to 2025-26, including an estimated government budgetary support of 97,631 crore. State-run power sector lenders, Power Finance Corp. Ltd, and its subsidiary Rural Electrification Corp, are nodal agencies for implementing the scheme.

In an interview to Mint in November, Alok Kumar, secretary, Union ministry of power, had said that there was a need to increase the outlay for the scheme, considering that the projected cost of modernization and upgradation plans submitted by the states is far higher. He said several detailed project reports (DPR) have been sanctioned under the scheme and states have been tendering projects. However, he said work on the projects will be starting this year, but the major financial requirements will be in FY24. The revamped distribution sector scheme says funding under the scheme will be available only if a discom commits to an agreed trajectory for reducing its losses.

The renewed focus on strengthening the power distribution sector comes amid increasing losses along with dues of power bills from state government departments and agencies, and eventual increase in dues owed by discoms to power generation companies (gencos). The effort to install 250 million smart metres under RDSS by FY25 is aimed at avoiding dues in bill payments by consumers. So far, 173.43 prepaid smart metres have been installed under the scheme.

In a year-end review released on 27 December, the union power ministry said capital investment is budgeted for loss reduction work, system strengthening to cater to increasing load and modernization to make smart distribution system under the RDSS.

The loss reduction projects includes installing aerial bunched (AB) cables, high-voltage distribution systems and feeder bifurcation. System strengthening includes setting up of new substations, feeders and upgrading transformation capacity and cables among others.

Modernization plans will include Enterprise resource planning Supervisory Control And Data Acquisition, and Geographic Information Systems to ensure smarter distributions systems.

So far, loss reduction works of 1.05 trillion have been sanctioned for 23 states and union territories and 2,663.97 crore was released as the government’s budgetary support under RDSS, the ministry said.

Rituraj Baruah
Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 03 Jan 2023, 06:23 AM IST
Recommended For You
Get alerts on WhatsApp
Set Preferences My Reads Watchlist Feedback Redeem a Gift Card Logout