Budget 2021: Rs 3.05 trillion Electricity Distribution Reform Programme announced

The Finance minister of India, Nirmala Sitharaman, announced a Rupees 3.05 trillion electricity distribution reform programme while presenting the Union Budget 2021.

Highlights

  • The electricity distribution programme will help in reducing the losses and improve the efficiency of electricity distribution companies (DISCOMs).
  • A framework that allows a choice of electricity supplier to consumers was also announced during the budget presentation.
  • The government is also considering to table the Electricity (Amendment) Bill, 2021.
  • The bill proposes for the measures like “de-licensing” of the power distribution business in order to bring the competition.

Atal Distribution System Improvement Yojana

  • The is a Reform-linked and Result-Based scheme that will subsume ongoing programmes like Integrated Power Development Scheme and the Deen Dayal Upadhyaya Gram Jyoti Yojana.
  • This Reforms-Linked and the Result-Based Scheme for Distribution was initially referred to as the Atal Distribution System Improvement Yojana.
  • The scheme is being formulated with the aim of helping the power DISCOMs to cut down the electricity losses by 12-15% of the current levels.
  • The scheme also aims to narrow the deficit between the cost of electricity and price at which it is supplied to ‘zero’ by the end of March 2025.
  • The scheme will work in phase manner.
  • The scheme comprises of a compulsory smart metering ecosystem across the distribution sector from the electricity feeders to the consumer level.
  • Further, the loss reduction measures like separate feeders for agricultural and rural household consumption will also be rolled out.
  • A compulsory prepaid and smart metering component will also be implemented across the power distribution chain. It will also be implemented for 250 million households.

Why this scheme has been launched?

Power DISCOMs are the weakest link in the electricity value chain. They usually face the challenges like low collection, inadequate tariff hikes, increase in power purchase costs and subsidy disbursements.  The government data says that, the aggregate loss for the DISCOMs sector in the year 2018-19 was ₹85,000 crore. Thus, this scheme has been proposed in order to help DISCOMs to raise funds.

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