Answer. Amid the Covid-19 pandemic last year, the government of India announced a rescue package for the power sector under the Atmanirbhar Bharat plan. This rescue package was arranged to prevent the entire power sector chain from suffering because of the discoms’ inability to meet their obligations. This is not the first time (earlier intervention: UDAY scheme) that the Centre government has stepped in to aid discoms and tackle the problems plaguing the distribution segment. However, even after the repeated interventions, the end result has been the cash-strapped discoms looking for another rescue package. This highlights the major structural problems ailing the power sector, which must be rectified for a sustainable power sector in India.
Associated Challenges
- AT&C Losses: Aggregate technical and commercial (AT&C) losses stem from poor or inadequate infrastructure or on account of theft or bills not being generated or honoured.
- Cost-Revenue Gap: The difference between discoms’ costs (average cost of supply) and revenues (average revenue realised) is still high.
- Magnifying Effect: Paradoxically, the government’s push for ensuring electrification of all has contributed to greater inefficiency. As household connections are ramped up, to support higher levels of electrification, cost structures need to be reworked, and the distribution network (transformers, wires, etc) would need to be augmented.
- Economic Fallout of the Pandemic: Amid pandemic, with demand from industrial and commercial users falling, revenue from this stream, which is used to cross-subsidise other consumers, has declined, exacerbating the stress on discom finances.
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