PM launches revamped distribution sector scheme for power sector

News: PM Modi launched the Revamped Distribution Sector Scheme at ‘Ujjwal Bharat Ujjwal Bhavishya – Power @2047’ which is aimed at improving the operational efficiencies and financial sustainability of the DISCOMs and Power Departments. Which can be achieved by 1) Conditional financial assistance: A DISCOM eligible for financial bailout would be required to draw an action plan to strengthen its distribution system, improve operational efficiency and reliability of supplied power. 2) Subsuming of various schemes: It is proposed that the currently ongoing and approved projects under the following Schemes would be subsumed. 3) Solarization of agricultural feeders: The Scheme focuses on funding for feeder segregation for unsegregated feeders, which would enable solarization under KUSUM scheme. 4) Smart metering: The Scheme enables consumer empowerment by way of prepaid smart metering. 5) Leveraging Technology: Artificial Intelligence to be used to generate energy accounting reports in order to enable DISCOMs in taking informed decisions on loss reduction, demand forecasting, Time of Day tariff, renewable energy integration. The scheme has an outlay of over Rs 3 lakh crore over a period of five years from FY 2021-22 to FY 2025-26, the scheme aims to provide financial assistance to DISCOMs for modernization and strengthening of distribution infrastructure, focussing on the improvement of the reliability and quality of supply to end consumers. It also aims to reduce the AT&C (Aggregate Technical and Commercial) losses to pan-India levels of 12-15% and the ACS-ARR (Average Cost of Supply-Average Revenue Realized) gap to zero by 2024-25 by improving the operational efficiencies and financial sustainability of all state-sector DISCOMs and Power Departments.

Views: The scheme was already announced earlier with its specific countours. Given the intent has always been there will all earlier schemes to improve the financial health of Discoms, but the execution in the past has been below expectations. The key going ahead how fast execution of this programme happens given some of the provisions under scheme like TOTEX model for smart meters require upfront capex from the entities wining the bid, quarterly disclosures of results by Discoms etc will is an uphill task. 

Impact: Neutral.