State-specific solutions needed for discoms’ problems: PM Modi

Prime Minister Narendra Modi said the Union power ministry should try and put in place state-specific strategies to improve their performance.

Prime Minister Narendra Modi said instead of looking for a ‘one-size-fits-all’ solution for the precarious financial position of electricity discoms, the Union power ministry should try and put in place state-specific strategies to improve their performance.

Modi reviewed the actions taken by the power and renewable energy ministry on Wednesday evening, where the revised tariff policy and the Electricity (Amendment) Bill 2020 were also discussed. The PM pointed out that “the problems in the power sector, especially of the electricity distribution (discom) segment, vary across regions and states”.

The development comes soon after government unveiled the draft amendments to the Electricity Act, which is seen to appropriate the authority of the states in decisions related to power supply. The latest amendment proposes states to determine power tariffs without any subsidy, aligning with the Union government’s principle that subsidies to the needy should only be passed on through the direct benefit transfer mechanism. Many states have opposed such impositions. The new amendment proposal also links the reduction in open-access surcharges and cross-subsidies with the trajectory provided in the national tariff policy, which till now, has been a prerogative of the states.

In a letter to the PM earlier this month, Tamil Nadu chief minister Edappadi K Palaniswamy had pointed out that the proposed amendment Bill seeks to take away the power of the state government in deciding the constitution of the state electricity regulatory commission. “This would unnecessarily dilute the authority of the (state) electricity regulatory commissions and needs to be deleted,” Palaniswamy said.

The Rs 90,000-crore loan package for discoms to battle the coronavirus crisis is also contingent on the states agreeing to implement the Centre-mandated measures such as putting in place a mechanism to release electricity subsidies in advance and enabling digital payment of electricity bills. The new push to reform discoms follow the fragmentary success of the Ujwal Discom Assurance Yojana (UDAY), with most states failing to meet the operational targets under the scheme.

The UDAY scheme could have had even lesser efficacy than claimed with latest audited data finding that the combined losses of discoms stood at Rs 33,365 crore in FY18, more than double the level reported earlier by the states. The PM has advised the power ministry to ensure that discoms publish their performance parameters periodically.