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Web Exclusive | February 2013

Centre needs Rs 1,500 cr for discom restructuring

Determined to ensure its ambitious turnaround plan for ailing distribution companies meets with success, the Power Ministry has sought a Rs 1,500-crore budgetary support for funding the Transitional Finance Mechanism (TFM) under the scheme in 2013-14. It also wants Rs 4,500 crore for its rural electrification programme, the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), an 80 per cent jump over the revised estimate of Rs 2,492 crore for this financial year.

The earlier allocation for the year was Rs 4,900 crore. The Rs 1,500-crore central allocation is to be available for states showing an accelerated reduction in commercial and line losses.

The financial restructuring package specifies measures to be taken by state distribution companies (discoms) and state governments, restructuring their debt with TFM support. Transitional central finance is to provide liquidity support through a grant equal to the value of the additional energy saved through loss reduction.

States will be eligible only if the gap between the Average Revenue Realised (ARR) and the average cost of supply (CoS) is reduced by at least 25 per cent during a year over 2010-11. The gap between ARR and CoS pushed up states’ accumulated loss to Rs 2.4 lakh crore at the end of March 2012.

With input cost rising at the back of fuel charges and revenue coming under constraints due to stagnant rates of supply, the gap rose to Rs 1.45 a unit (KwH) in 2009-10 from 76p in 1998-99. Also, the combined debt of all discoms reached Rs 1.9 lakh crore in March 2012, as more and more distributors opted for loans to meet even operational costs. Despite their stated willingness to reform distribution, states are yet to formally accept the FRP.

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