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NDA govt sets ball rolling on '24X7 Power for All' with 3 states

Business Standard:  September 21, 2015

New Delhi: The National Democratic Alliance (NDA) - led government has taken first step towards its poll promise of ‘24X7 Power for All’ by joining hands with three states – Goa, Uttarakhand and Meghalaya. These states through a joint initiative will make way for slew of technical and commercial reforms ranging from more power procurement, strengthening the transmission and distribution (T&D) and regular tariff hikes.

However, unlike earlier populist measures of giving financial aid, the central government is facilitating technical reforms and pursuing states to take up financial issues like hiking tariff, bringing down debt and raising funds from market.

The total fund requirement till FY19 for all proposed reforms for Uttarakhand would be Rs 4,854 crore. Meghalaya would require Rs 2,553 crore and Goa Rs 1,576 crore.

Apart from the budgetary support from its flagship schemes – Deendayal Upadhyaya Gram Jyoti Yojana and Integrated Power Development Scheme, no funding or financial bail-out package would be given by the Centre to the state.

The joint initiative document however mentioned that the state can ask for financial support but only when its generation, transmission and distribution utilities abide by its respective State Electricity Regulatory Commission (SERC).

These three states reel under huge losses and mounting debt owing to years of not increasing consumer tariff. The accumulated financial losses of power distribution arm of Uttarakhand stands as Rs 1,695 Crores, of Meghalaya Power Development Corporation at Rs 694 crores and Rs 624 crore of Electricity Department of Goa.

CRISIL has prepared the report on the state utilities and suggested ways and measures to reform the system. The document proposes tariff hike in range of 1.7 per cent for Uttarakhand to 11 per cent for Goa and 15 per cent for Meghalaya from next financial year onwards.

The five point agenda for these states are – increased power generation from local energy sources (for instance hydro in Uttarakhand), improve inter-state transmission network, revive the sick distribution sector, enhance use of renewable energy, use energy efficient measures. Among other suggested initiatives are developing a strong communication, IT and monitoring division.

The centre would assist on the following – central financial assistance provided from ministry of new and renewable energy for its various schemes and assistance provided from ministry of power under its various schemes for rural and urban electrification.

The state in turn would have to do regular tariff hike in order to be financially viable to take up such reforms. The joint document, to which the states also have adhered, clearly mentions that any shortage of fund would be met through external/market borrowing from financial institutions or developmental aid agencies, which the state would facilitate for self.

“This joint initiative of Government of India and Government of Uttarakhand (Goa and Meghalaya) aims to further enhance the satisfaction levels of the consumers and improve the quality of life of people through 24x7 power supply. This would lead to rapid economic development of the state in primary, secondary & tertiary sectors resulting in inclusive development,” said Piyush Goyal in one of the three joint statements.

Business Standard reported last week the Centre had come up with a slew of carrot and stick measures to push sick state power distribution companies towards financial and technical restructuring.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

x IBEF : India Brand Equity Foundation