June 02

Power minister proposes a new scheme worth Rs 3 lakh crore to finance commission

Power minister RK Singh proposed a new scheme for the power sector amounting to Rs 3 lakh crore spanning five years, in his meeting with the 15th Finance Commission (FC) on Friday.

Officials of the power ministry discussed the need to restructure the power system to make states responsible for the financial health of their power distributions companies (discoms), with the NK Singh-led FC.

This would entail recalibrating state borrowing limits under the Fiscal Responsibility and Budget Management (FRBM) Act, to account for the added liabilities, the press release said.

The new scheme included an amalgamation of old schemes under the power ministry and focused on reducing losses in the power sector, separate feeders for agriculture and smart prepaid meters

The minister also discussed policy reforms that were in the pipeline to turnaround the beleaguered power sector, including amendments to the Electricity Act. The meeting was in continuation to the recommendations the FC made on the power sector in its FY21 report released in November last year. The FC’s report had noted that most states had reduced their aggregate technical and commercial (AT&C) losses and the difference between average cost of supply and average realizable revenue (ACS-ARR) after implementation of the Ujwal Discom Assurance Yojana (UDAY) in 2016-17. However, the progress was not sustainable unless systemic issues in the power sector are suitably addressed, it added.

The commission will have to take into account the significant change in circumstances for the sector, including the Covid-19 and lockdown shock and the Rs. 90,000 crore liquidity injection for discoms announced by finance minister Nirmala Sitharaman, as part of the Atmanirbhar Bharat package.

The FC was mandated to work out a fiscal consolidation roadmap for five financial years starting from the ongoing FY21 to FY26. Its final report is due on October 30. Earlier in May, the commission met with its committee on fiscal consolidation roadmap, that was constituted to take stock of the emerging situation and chart the way forward to review the fiscal consolidation of the general government.  

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