Will power plan be third time lucky

Power minister Piyush Goyal must be congratulated for coming out with the Ujjawal Discoms Assurance Yojna (Uday), which will relieve the heavily debt-burdened power distribution companies (discoms) of their huge losses and enable them to get fresh loans and become solvent. Uday also lays out a road map of how this will be achieved. The states have been incentivised to take over 75 per cent of the accumulated debt of the discoms, estimated at Rs 4.3 lakh crore, in two instalments. They will get cheaper power and coal and funding on a priority basis through various schemes, like the Integrated Power Sector Development Fund. The remaining 20 per cent can be converted into bonds by the banks and other institutions.

This will also relieve the public sector banks of the huge losses as they had lent Rs 4.3 lakh crore to these discoms. Rating agency Crisil has estimated that the conversion of discom loans into bonds would lead to capital savings for PSBs of over Rs 12,000 crore in 2017 and would shave over eight per cent of the profit of public sector banks (PSBs) in fiscal 2017. The discoms say they suffer losses because they have to sell power at below their purchase rate and the regulator does not permit them to raise tariffs. However, the government has rejected this excuse, saying citizens should not be made to pay for the inefficiencies of discoms. It is a fact that the discoms have run up transmission losses of Rs 62,000 crore till March 31, 2015 because of criminal negligence and poor operational systems. This should be brought under control. Corruption will have to be rooted out, in addition to inefficiency. There is no reason why the theft of electricity, which is significant, cannot be controlled.

Though the scheme is quite thorough, the test will lie in its implementation. This is the third attempt over the years to try and put the discoms on their feet. One hopes it will be a case of third time lucky for the government. In a way, the scheme has inbuilt provisions that put the responsibility on the government to see that the discoms function efficiently. They will have to reduce their technical and commercial losses to 15 per cent in three years. Future losses will have to be taken over by the states in a graded manner, so the states will automatically keep a sharp eye on the functioning of the discoms or risk taking the debt onto their books.

If Uday succeeds and the discoms function like a commercial operation, it will bring about a revolution in the distribution system and help realise the Prime Minister’s 24x7 power-for-all ambition. It is also crucial to the success of the other schemes, like Make in India.