Creation of national electricity distribution company could help turn around the power distribution segment. Comment.

Public Sector companies the NTPC and the Power Grid Corporation of India have finally come to set up a national electricity distribution company in a joint venture. This has cleared the route for the central public sector company to step into the business of power supply which had been until now only the preserve of the state. It is apparent that the move will have wide implications for the power distribution segment which has been facing many issues for many years. The distribution segment is the weakest link in the whole power chain as its bad shape has come to affect the whole sector. Despite the UDAY scheme of the NDA which was launched in 2015 with an aim to end the woes of the sector, the sector still is ripe with issues which range from an inadequate rise in tariffs, technical and commercial losses, less and irregular disbursements of subsidies, etc. All these have had a profound effect on the profits of the power generation companies and also the banking sector. Thus, the establishment of the national electricity distribution company can plug in many of the loop-holes and spell relief to the power producers. Also, the electricity will be procured at more competitive rates.

Topics: GS-III: Infrastructure Energy Sector