Prime Minister takes stock of sick power distribution companies

States with the high exposure like had requested for relaxation of FRBM limit

Prime Minister Narendra Modi on Monday discussed the proposals moved by the ‘distribution reforms committee’ set up by the Union power ministry, to help the ailing power distribution sector. The committee, which had held a meeting with all state electricity boards last Saturday, suggested a slew of ‘stock and flow’ measures to tackle the debt exposure of the sector totalling Rs 3.17 lakh crore.

Power minister Piyush Goyal and senior officials — from the Prime Minister's Office, and power and finance ministries — attended the meeting. Official sources said the states with the highest exposure — Rajasthan, Uttar Pradesh, Haryana, Jharkhand, Bihar, Andhra Pradesh, Tamil Nadu and Telangana - had requested for relaxation of Fiscal Responsibility and Budget Management (FRBM) limit.

FRBM represents the amount of deficit a state can have. A relaxation on it would translate into states adjusting more fiscal deficits in their public accounts. Officials said the Centre was working on a two-pronged approach to help the financially sick and technically unsound discoms.

“For the accumulated losses, it was proposed that the state government take over and issue bonds against the same. To bring in operational efficiency and ensure losses don’t accumulate again, respective discoms will have to reduce their AT&C (aggregate technical and commercial losses) in a time-bound manner,” said a senior official with one of the states who attended the meeting on Saturday.  The power ministry has not finalised any bailout plan for the discoms, said the source, adding that it has been categorically transpired to the committee that anymore fund disbursal would end up in losses and, hence, should be avoided.

“States will take the onus to reform their power distribution business. Banks won’t lend anymore to these discoms, so they will have serviced their debt as soon as possible,” said the official who participated in the meeting.

Among the technical reforms suggested are improving last-mile transmission and distribution (T&D), reducing energy theft, smart metering and implementing the two flagship schemes of the government – Integrated Power Development Scheme for urban areas and Feeder Separation Programme for rural populace.

The ‘sick’ status of the discoms is hurting the supply chain with power generation companies unable to sell more power, despite surplus fuel availability.

The business of allied sectors such as construction companies for power plants, the overall investment in power generation is in the negative as the demand for power is subdued. Despite 275,000 Mw of installed capacity, India suffers from peak power deficit of three per cent., in north and east it's high as 6per cent and 11per cent.