Budget 2021: Power discoms get second chance, Rs 3.05 trillion for reforms

Scheme will provide assistance to discoms for infrastructure creation, inclusion of prepaid smart metering, feeder separation, upgradation of systems

Union Finance Minister Nirmala Sitharaman announced a Rs 3,05,982-crore outlay on Monday for a revamped reform scheme for struggling power distribution companies (discoms).  

“Distribution companies across the country are monopolies, either government or private. There is a need to provide choice to consumers by promoting competition. A framework will be put in place to give consumers options to choose from among more than one distribution firm,” she said.

The ministry of power had, in 2018, suggested separation of the content and carriage business of discoms. The power infra was to be owned by discoms but the power was to be supplied by several players to induce competition and offer choice to consumers. The suggestion was removed from the subsequent proposed amendments in 2020 to the Electricity Act, 2003.

“The viability of discoms is a serious concern. A revamped, reform-based, results-linked, power distribution sector scheme will be launched with an outlay of Rs 3,05,982 crore over five years. The scheme will provide assistance to discoms for infra creation, inclusion of prepaid smart metering, feeder separation, upgradation of systems,” she said.

The budgetary allocation to the reform-linked distribution scheme under the ministry of power, however, received Rs 1 lakh for 2021-22. The two flagship existing schemes for urban and rural reforms — IPDS and DDUGJY — received Rs 3,750 crore and Rs 3,600 crore, respectively. While for IPDS, the outlay has increased minimally by 1.35 per cent, DDUGJY budget grant was higher by 80 per cent over revised allocation for 2020-21.

It is likely that the Centre and states would share the cost of scheme with Central grant for several power sector schemes linked to performance of the discoms, this paper had reported recently.