Budget 2021. Why 24X7 Power For All, Tackling Discom Losses Is key

Hopes are once again high that the government will take a broom to clean up discom losses in some way, one of the most intractable issues for the power sector for decades now.

As always, the present time remains the best time to do something about it.

On January 29 morning, power minister R.K. Singh announced how peak power demand hit a record high of 187.3 gigawatts (GW), to make a case for a strong economic recovery across the country. But while this was indeed good news, he has maintained silence on future moves for discoms, beyond the covid package announced. That Rs 1.2 lakh crore liquidity assistance program for discoms has had adequate success in the short term, with Rs 1.18 lakh crore of loans sanctioned by September 2020. But in the same period, discom dues to power generators have continued to rise. In fact, these dues had risen to Rs 1.3 lakh crore by  November 2020, compared to Rs 97,875 crore on March 31, 2020.

This is because even as loans have helped ease immediate liquidity issues for some discoms, the cause for these liquidity issues, made worse by the pandemic, remain. These include poor collections efficiency, and AT&C losses, that continue to be well behind targets for most. 24X7 power for all, the next big power target, is also hostage to precisely these issues, as discoms are unable to purchase enough power, especially for rural areas where issues of collection and losses are highest. Or where power is subsidised.

These issues need to be tackled, especially 24X7 power for all, as it has the potential to achieve some of the biggest changes the sector, especially renewable energy needs. Even households that have been connected to the national grid in the past 2 years don’t have anything approaching 24X7 power. A concerted effort to achieve this would mean higher power demand, a key requirement for the system absorbing more renewable energy coming online.

Options like discom provatisation, one time write offs and more will need to be considered to make real change happen. The electricity  amendment bill 2020, which has become a victim of the politics around the farm laws, also needs to be extracted and passed, as it really  does have the potential to make real change on the ground possible by providing a pathway to capping losses and providing sanctity to both RPO’s and contracts.

No more action will certainly not help, with discom losses projected to grow to Rs 75,000 crores for 2021-22 already.

So with UDAY 2.0 be announced today to energise the power sector yet again? Watch this space!