Union Cabinet approves Rs. 3.03 lakh crores reform-based power distribution scheme

The scheme aims at improving the quality and reliability of the power supply to consumers as well as strengthening the financial sustainability and operational efficiencies of all the discoms and power departments based on the State-specific Action Plans. 

Created On: Jul 1, 2021 10:07 IST
Power Distribution Scheme
Power Distribution Scheme

The Union Cabinet on June 30, 2021, gave its approval to a five-year-long reform-based result-linked power distribution scheme worth Rs. 3.03 crores in order to strengthen the system of utilities for improving efficiency.

The Minister of Power & Renewable Energy RK Singh said that the Government has done a lot for the power distribution reforms as it needs to be strengthened. He added that the Cabinet has approved the new scheme worth Rs. 3.03 lakh crores which include Rs. 97,000 crores central outlay.

The Union Minister informed that the funds will be given to the power distribution companies (DISCOMS) to strengthen their systems.

There will be a difference between this scheme and the earlier scheme, as this fund allocation will be conditional.

All those discoms that are in losses will not be able to get the funding under this scheme unless they make plans of reducing the loss trajectory, get it approved by the State Government, and submit that to the Central Government.

Objectives:

•  The scheme aims at improving the quality and reliability of the power supply to consumers as well as strengthening the financial sustainability and operational efficiencies of all the discoms and power departments based on the State-specific Action Plans. 

•  As the strengthening of the system of discoms is under process, the major objective of the scheme is to do back-end strengthening to commensurate with the expansion of the power sector.

•  Reducing the aggregate technical and commercial (AT&C) loss to 12% in the next five years. Currently, the losses are around 21%.

•  The scheme aims at providing an annual appraisal of the discom performance, modernization of distribution systems in urban areas, implement 25 crores of prepaid smart-metering in a public-private partnership mode, and 4 lakh km of low-tension overhead lines under the ongoing Central Schemes.

•  Its major focus will be on improving the electricity supply for the farmers and providing daytime electricity to them through the solarization of the agricultural feeders.

Power Distribution Scheme: Key Highlights

•  The scheme will be providing conditional financial assistance to discoms for strengthening the infrastructure creation, capacity building, up-gradation of system, and process improvement.

•  The implementation of the power distribution scheme will be based on the action plan worked out for each state rather than a ‘one-size-fits-all approach.

•  The mega scheme will be available till 2025-26. Power Finance Corporation and Rural Electrification Corporation have been nominated as the nodal agencies for facilitating the implementation of the scheme.

•  Under the scheme, works of separation of 10,000 agriculture feeders will be taken up through an outlay of almost Rs. 20,000 crores.

•  With this Power Distribution Scheme, Central Schemes such as Deen Dayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme, and Pradhan Mantri Sahaj Bijli Har Ghar Yojana will be merged.

Background:

The Reform-Based Result Linked Power Distribution Scheme was announced in the Budget earlier in 2021.

On June 28, 2021, Union Finance Minister Nirmala Sitharaman had again announced the scheme as part of the stimulus package post-second wave of COVID-19 in order to boost the economy.

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