Failure of the rise scheme: It is necessary for the government to be serious about improving the situation in the power sector

The financial health of the country's electricity sector has become a major concern. The Reserve Bank of India has also pointed out the relative risk to the financial situation of the states due to the power sector. The last Ujjwal DISCOM Assurance Scheme (Uday) for the uplift of the power sector was implemented by the Central Government in 1. Under the scheme, the state government had to take the debt at the head of the State Electricity Distribution Companies (DISCOMs) at 5% and the remaining 5% debt had to be paid by issuing lower interest rate bonds.

The rise is coming to an end in March this year and the central government plans to bring a new scheme in place. States participating in the Udaya Yojana were required to reduce their technical and commercial losses. While many states participating in the rise have not been able to fulfill their commitment, the debt burden of the DISCOMs has been restored to the previous level.

The reforms carried out in the electricity sector in the country, the financial well-being of the sector, had to be improved years ago but that has not happened. Under the Electricity Act, the Central and the States may appoint their own independent regulatory panels. The main function of the Commission is to calculate the electricity tariff. According to the Electricity Act, the state governments have to pay the money in advance for any class they want to provide electricity at cheaper than the electricity rate of the discos.

The state governments can provide electricity to the farmers for free but they have to allocate the money to the discos from the budget. But in fact, in most states of the country, political leaders have not taken the power stream seriously, it can be said from the financial position of the discos. Discoms have been dominated by the state government.

Even the regulatory panels operating in the states do not like to offend political leadership. Therefore, when determining the electricity tariff, these panchayats, which assume the security of keeping rates according to what the government in that state wants and estimate the rates, should stay. Retired appointments of retired government bureaucrats are taking place at the head of the panchayat.

In such a case, it is wrong to assume that the rates fixed by the regulatory panchayat will be charged for the production of electricity. As the revenue sources for most states in the country are short, the amount of money paid to DISCOMs is always stretched, which has a direct impact on the financial health of DISCOMs. Discoms suffer from poor financial position. This situation is seen despite the provision of advance payments.

However, assuming the political leadership of the country can financially fit the power sector of his state. For this, he was conducting the exercise of separation of power supply for agriculture and separation of power supply for domestic use of farmers. Because in most states, there is a standard for providing cheap electricity to the overcrowded farmers.

A recent report by a rating agency said that under the Uday Scheme, the work of improving the financial health of DISCOMs was slow. In some key states, the expected reduction in aggregate technical and commercial (AT&C) losses has not been observed.

A statement made by the government in Parliament said that AT&C fell from 3 per cent to 5 per cent, while for states participating in the emerging scheme, it was decided to lower the rate to below 8 per cent. The main objective of the UDAY scheme is to improve the financial well-being of DISCOMs, but the state governments do not see that the money left to pay DISCOMs remains unpaid.

According to the data of the central government, Rs 5 crore is owed to the discos by various departments of the state governments. To save their vote bank, state governments have announced to provide free or cheap electricity to some weaker sections besides the farmer, but the money that comes to pay for the discos is not timely.

How can the financial well-being of Discoms be improved in such a situation? In the last financial year, the total loss of DISCOMs was Rs. 5 crore. The failure of the rise in the financial and operational parameters indicates that the power sector is still dominated by the power sector in many states of the country.

The Uday Scheme hoped to provide the necessary relief to the country's discos, but did not receive the relief it expected. By taking advantage of the scheme, DISCOMs have repaid their debt to the states. This has led to an improvement in their financial health at the outset, and some DISCOMs have even started to show profits, but the financial condition of the states has worsened as a result of the DISCOMs taking over themselves.

Under the failure of the Udayam scheme, the central government intends to introduce a new scheme of good infrastructure, smart meters and private franchise model to increase the supply of electricity to the country from April next year, which is estimated to cost around Rs 1 to 5 trillion. In addition, a new scheme is being planned to improve the existing transport and distribution infrastructure and to improve the functioning of state-owned power distribution companies.