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New Delhi: The government will soon come out with a scheme to help power distribution utilities cut losses, in turn improving electricity consumption and raising living standards, power minister R.K. Singh said on Monday.

Speaking at Energyscape, the Mint energy conclave 2020 in the capital, Singh said the scheme will address one of the biggest challenges in the power sector—the health of electricity retailers. It will help spur the latent power demand in the economy that is key to making the sector viable.

Singh said the previous scheme for loss reduction of power retailers, UDAY, had helped in reducing the collective loss of these entities from about 24% to 18% of revenue.

The minister said the scheme worked, but not to the extent the government wanted. The new scheme will specify a trajectory for loss reduction for power distribution companies and will have incentives and disincentives built into it for meeting targets.

“We will give assistance for loss reduction such as for (setting up) high voltage distribution systems in loss-prone areas. We will give loans provided you stick to the (loss reduction) trajectory. If not, we will not be able to give you any loans… That is the package we have drafted. There will be incentives and disincentives," the minister said.

Rajeev Sharma, chairman and managing director of Power Finance Corporation, said during a panel discussion that there was a need to restore the viability of power distribution companies so that transmission and generation companies too stay healthy.

“Conventional power will continue to be the mainstay for at least 15-20 years. We need to make it more environment friendly, switch to better technology so that efficiency improves... but we cannot ignore renewable energy," Sharma said. “As the minister said, we are facing problems in setting up renewable projects... as land (acquisition) is an issue, transmission charge is another one."

The minister said India was on course to achieving its target of meeting 40% of its power demand from renewable energy sources. Singh said existing renewable energy capacity and projects under construction together account for almost 37% of the country’s installed power capacity. “This means we are close to the target. We will reach the 40% target latest by 2021 or 2022. By 2030, our estimate is that 50-55% of our power capacity will be from renewable sources. That is impressive by any standards for any country," said the minister.

According to data available with the power ministry, India has an installed capacity of 368 gigawatts, about a fourth of which is renewable energy, including small hydropower projects.

Singh said India has in recent years added power capacity, enhanced access to electricity and connected the whole country to one grid. “In the past five years, we have added 120,000 circuit km (of network) at the national level, excluding intra-state networks," said the minister, adding that places such as Leh, Kargil and Drass have been connected to the grid.

One goal of the Narendra Modi administration is to “electrify the economy", moving away from the use of fossil fuels so that the bulk of the energy requirement is met by renewable sources. “We intend to shift mobility and cooking to electric energy. That makes sense for energy efficiency. I have asked my ministry to work out the ways and means. Cooking can be easily shifted to electricity. It is as cheap if not cheaper than LPG. We will start a communication campaign," said Singh.

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